CESTAT Chennai Sets Aside ₹1.57 Crore Customs Demand on Nagarjuna Hospital as Time-Barred

February 03, 2026 : The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a customs duty demand of ₹1.57 crore raised against Nagarjuna Hospital Ltd., holding that the show cause notice issued by the Customs Department was barred by limitation.

The Bench, comprising Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member), quashed the entire proceedings solely on the ground of limitation, without examining the merits of classification. The appeal arose from the import of a “TrueBeam” Linear Accelerator system along with accessories by the hospital at Vijayawada under two Bills of Entry dated 18 March 2016. The hospital had claimed exemption from customs duty under Notifications No. 12/2012-Cus. and 21/2012-Cus. by classifying the equipment under Customs Tariff Heading 9022 90 30 as a radiation beam delivery unit.

The consignments were subjected to first-check examination, during which Customs officers physically examined the goods and scrutinised the catalogues and supporting documents. Final assessment was completed thereafter, duty was paid, and the goods were cleared in May 2016. More than a year later, the Customs Department initiated an investigation and issued a show cause notice on 26 September 2017, alleging deliberate misclassification to wrongly avail exemption. The Department’s case was that the Linear Accelerator was a complete cancer therapy system classifiable under CTH 9022 14 90, and that the importer had split the system into multiple consignments to facilitate an ineligible classification.

On this basis, the Commissioner of Customs confirmed a differential duty demand of ₹1.57 crore under Section 28(4) of the Customs Act, along with interest and an equal penalty, and ordered confiscation of the goods with an option of redemption on payment of fine.

Before the Tribunal, the appellant argued that the entire demand was time-barred since the goods had been examined and finally assessed after first-check inspection, and the notice was issued beyond the normal one-year limitation period. It was contended that there was no suppression or misdeclaration and that the dispute, at best, concerned classification alone. Reliance was placed on earlier Tribunal decisions involving similar imports of Linear Accelerators, including cases where invocation of the extended period of limitation had been rejected.

The Revenue alleged deliberate suppression, arguing that the importer, being a medical professional, was aware of the true nature and correct classification of the equipment. It was also contended that proceedings under Sections 124 and 125 of the Customs Act were not fettered by strict limitation.

Rejecting these arguments, the Tribunal held that when goods are subjected to physical examination and detailed scrutiny by Customs officers prior to clearance, allegations of suppression or fraud cannot rest on assumptions or suspicion. The Bench observed that seeking first-check examination and classification scrutiny cannot be treated as a deceptive act, adding that “strong suspicion, strange coincidences and grave doubts cannot take the place of legal proof.” It further held that the Department could not improve its case at the appellate stage by relying on legal grounds not pleaded in the show cause notice, emphasising that the notice itself is the foundation of the proceedings.

Once the demand was found to be time-barred, the Tribunal held that there was no need to examine the classification issue on merits. Relying on earlier decisions in cases such as Dr. Rai Memorial Cancer Institute and MIOT Hospitals Pvt. Ltd., the Bench concluded that the present case was fully covered by settled law. Accordingly, the impugned order was set aside in its entirety, the appeal was allowed, and Nagarjuna Hospital Ltd. was held entitled to consequential relief in accordance with law