CESTAT Chennai: Central Excise Cannot Reclassify Imports Once Customs Classification Accepted

April 2, 2026 : The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Central Excise authorities cannot reopen or question the classification of imported goods once the same has been accepted by Customs at the time of import, setting aside a demand raised against M/s Emerson Process Management Chennai Pvt. Ltd.

The dispute arose from the classification of “Valve-Link Software” imported by the assessee. At the time of import, the goods were classified under CTH 90328990, and applicable Countervailing Duty (CVD) and Special Additional Duty (SAD) were paid. The assessee subsequently availed CENVAT credit of the duties so paid.

Later, the Central Excise Department sought to reclassify the same goods under CTH 85238020 as “Information Technology Software,” which was fully exempt, and proposed denial and recovery of the CENVAT credit on the ground that the duties were not payable.

The Tribunal, comprising Judicial Member P. Dinesha and Technical Member M. Ajit Kumar, rejected this approach. It observed that once the Customs authorities had accepted the classification and the payment of duties, it was improper for another wing of the same Department to take a contradictory position. The Bench noted that such conduct creates an “uncomfortable situation” and undermines consistency within the Department.

The Tribunal further emphasised that if the classification adopted at the time of import was incorrect, it was for the Customs authorities to dispute it at that stage. In the absence of any such challenge, the Central Excise authorities could not independently reclassify the goods and deny the credit.

Importantly, the Bench held that the recovery of CENVAT credit was legally unsustainable because the credit related to CVD and SAD levied under the Customs Tariff Act on imported goods, and not to excise duty on domestically manufactured goods. Therefore, the Central Excise Department lacked the basis to deny such credit on the ground of reclassification.

Setting aside the impugned order, the Tribunal allowed the appeal with consequential benefits to the assessee.

Cause Title: M/s. Emerson Process Management, Chennai Pvt. Ltd. v. Commissioner of GST & Central Excise, Chennai South Commissionerate
Case No.: Excise Appeal No. 41399 of 2018
Decision Date: 02 April 2026