Whether Domestic Water Meters are Classifiable Under “Liquid” or “Flow Meters”? Supreme Court to Decide Matter [Read Order]

The Supreme Court is going to preside over a dispute concerning the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi’s ruling on whether domestic water meters are classifiable as “liquid meters” under Customs Tariff Item (CTI) 90282000 or “flow meters” under CTI 90261010.

The issue carries implications for manufacturers, EPC contractors, water utilities and Smart City infrastructure across India.

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, delivered a ruling on this issue, affirming the authorities’ view that the imported meters are properly classifiable under CTI 90282000 and not under CTI 90261010, thereby disallowing the benefit of Nil Basic Customs Duty under Notification 24/2005-Cus.

The assessee, M/s SPML Infra Ltd., is engaged in water supply projects, imported AMR/Non-AMR meters from Israel and China through ICD Tughlakabad, Air Cargo Complex New Delhi and JNCH Nhava Sheva.

These were declared under CTI 90261010 as flow meters, claiming exemption from duty. The Directorate of Revenue Intelligence received intelligence that the goods were actually domestic water consumption meters intended for volumetric billing and not instruments for measuring the rate of flow.

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A detailed investigation ensued, including searches under panchnama, recovery of the contract between the appellant and Delhi Jal Board (DJB), statements recorded under Section 108 and analysis of technical specifications. Evidence revealed that the meters were installed at consumers’ premises for billing purposes. It further appeared that the importer had earlier imported identical meters in 2012 and classified them under CTI 90282000.

The Appellant’s Chartered Accountant, Bhaskar Thakkar, argued that the meters measured flow rate using defined Q-values in line with ISO standards and were therefore classifiable under CTI 90261010. He also submitted that the Bills of Entry were self-assessment orders, which could not have been disturbed without filing an appeal under Section 128 of the Customs Act, relying on the Supreme Court judgment in ITC Ltd.

The Revenue representative S.K. Rahman pointed out that the contract with DJB described the goods specifically as domestic water meters for consumption and revenue billing, without any reference to flow-rate measurement. It was submitted that the Appellant’s conduct revealed a clear intent to wrongly avail duty exemption.

The authorities cited statements recorded under Section 108 and documentary evidence demonstrating deliberate alteration of classification and change of customs broker for the purpose of evading duty.

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The Bench of Dr. Rachna Gupta, Judicial Member, and P.V. Subba Rao, Technical Member held that the meters were domestic volumetric water supply meters falling squarely under CTI 90282000. The Tribunal rejected the argument that Section 128 appeal was a pre-condition to issuing a show cause notice under Section 28 of the Customs Act

Further held that deliberate misclassification to avoid duty justified the invocation of extended limitation. Thus, the duty demand with interest under Section 28 and Section 28AA was sustained along with confiscation under Section 111(m) of the Customs Act.

Penalties imposed under Sections 112, 114A and 114AA were upheld, whereas penalty under Section 117 was set aside since specific penal provisions already existed for the violations in question. The appeals were therefore only partly allowed, to a limited extent.

With significant implications, the dispute is now headed to the Supreme Court, which will hear the matter next on 05.12.2025.

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