IGST Demand on Defence PSU’s LRSAM Software Import Set Aside: CESTAT Rules Extended Limitation Misapplied [Read Order]

In a recent ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside a ₹29.35 crore Integrated GST (IGST) demand raised on the company’s import of specialised software for the Long‑Range Surface‑to‑Air Missile (LRSAM) System. The tribunal held that the extended period of limitation under Section 28(4) of the Customs Act, 1962, was wrongly invoked.

The tribunal observed that Bharat Electronics Limited, being a Defence PSU acting under the Ministry of Defence, could not be accused of wilful misdeclaration or intent to evade duty.

The appeal arose from an order dated 20 December 2024 passed by the Principal Commissioner of Customs, Bengaluru, confirming the IGST demand, confiscating imported goods, and imposing penalties under Section 114A.

The dispute concerned BEL’s import of a customised “EMI & EMC MIL‑STD 461F” software stored on a CD from Israel Aerospace Industries (IAI) for integration into the Long‑Range Surface‑to‑Air Missile (LRSAM) System used by the Indian Navy.

The appellant Bharat Electronics Limited argued that the imported software was an integral part of the LRSAM System and qualified for exemption under Serial No. 21 of Notification No. 19/2019‑Cus., as amended by Notification No. 03/2020‑Cus. The defence certificate issued by the Ministry of Defence confirmed the import was exclusively for defence purposes, counsel submitted.

On the other hand, the Department argued that the software was not covered by the exemption entry and was imported for BEL’s own use rather than for defence deployment. It alleged mis‑declaration and invoked the extended limitation period under Section 28(4), asserting intent to evade duty.

After hearing both sides, the bench comprising Justice Dilip Gupta (President) and R. Bhagya Devi (Technical Member) found that BEL, being a Public Sector Undertaking under the Ministry of Defence, could not be presumed to have acted with intent to evade duty.

The Tribunal observed that the Bill of Entry and purchase documents clearly described the item as software for the LRSAM System, and there was no concealment or misrepresentation of facts.

The bench noted that “Merely because the software was embedded in the system would not mean that providing a CD containing the software at a subsequent stage for providing support system to the LRSAM System would dis-entitle the appellant to claim exemption from payment of customs duty under the Exemption Notification. “

Holding that the extended period of limitation was not justified.

Accordingly, the impugned order dated 20 December 2024 was set aside, and the appeal was allowed

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