CESTAT Ahmedabad Upholds Reclassification of Synthetic Fabrics Based on CRCL Test; Remands Valuation and SEZ Exemption Issues

April 7, 2026 : The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench has upheld the reclassification of imported synthetic fabrics on the basis of CRCL test reports, while remanding the issues of valuation and eligibility for SEZ exemption for fresh adjudication.

The case arose from imports made by Om Siddh Vinayak Impex Pvt. Ltd., which declared 25,603.2 kg of goods as “100% polyester plain dyed fabrics” under CTH 54075290 and claimed exemption under Notification No. 137/2000-Cus. However, laboratory testing conducted by CRCL, Kandla revealed that the fabrics contained only 60% to 63.5% texturized polyester yarn, falling short of the 85% threshold required under the declared tariff entry.

Relying on these findings, the adjudicating authority reclassified the goods under CTH 54078290, enhanced the assessable value, and confirmed differential duty. The Commissioner (Appeals) had set aside this order, holding that the test report was inadequate. The Tribunal disagreed with this view and held that the CRCL report clearly established the composition of the goods and was sufficient for determining classification. It observed that the importer had not raised any objection to the report for several years and had sought retesting only after a gap of more than a decade, when samples were no longer available.

The Tribunal found no material on record to suggest that the test report had been doubted earlier either by the department or by the importer. It held that the delayed request for retesting could not be entertained and affirmed that the CRCL report was adequate to determine classification. On this basis, it upheld the reclassification of the goods under CTH 54078290.

On the issue of valuation, the Tribunal found that the department had enhanced the assessable value without following the prescribed procedure under the Customs Valuation Rules. It noted that the department is required to first reject the declared transaction value and then determine value on the basis of comparable imports by disclosing relevant data to the importer and granting an opportunity of hearing. Since these steps were not followed, the Tribunal set aside the valuation and remanded the matter for fresh determination in accordance with law.

With regard to the claim of exemption under Notification No. 137/2000-Cus., the Tribunal noted ambiguity in the Letter of Permission issued to the importer. The document, as reproduced in the record, listed both raw materials and finished goods together, making it unclear whether the import of fresh synthetic fabrics was permitted. The Tribunal directed the adjudicating authority to seek clarification from the Development Commissioner, Kandla SEZ on the scope of permitted imports under the LOP and to decide the issue afresh based on such clarification. It also directed that the adjudication should remain within the scope of the show cause notice.

Accordingly, the Tribunal upheld the reclassification of the goods but remanded the issues of valuation and SEZ exemption for fresh adjudication. The appeal filed by the Revenue was allowed by way of remand.