CESTAT Kolkata Quashes IGST Demand on Tea Machinery Imports, Rules Classification Must Be Challenged First

April 17, 2026 : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench has set aside an IGST demand raised against an importer of tea plucking and pruning machines, holding that the department cannot apply a higher tax rate under a residual entry without first disputing the classification adopted by the importer.

In its final order dated April 17, 2026, the Division Bench of Judicial Member R. Muralidhar and Technical Member Rajeev Tandon allowed the appeal filed by Sumitra Devi Kejriwal, proprietor of M/s Tea Spares (India), and restored the adjudicating authority’s order that had dropped the demand.

The dispute traces back to imports made in August and November 2017, where the appellant cleared tea plucking and pruning machines and their parts after self-assessing them under Customs Tariff Heading (CTH) 8432 and paying IGST at 12% under Entry 196 of Schedule II of Notification No. 1/2017-Integrated Tax (Rate).

During a post-clearance audit, the department alleged short payment of tax and issued a show cause notice on August 26, 2021, proposing to levy IGST at 18% under the residual Entry 453 of Schedule III, along with interest and penalties.

The Tribunal noted that the core flaw in the department’s case was its failure to challenge the classification of the goods. It observed that IGST liability is intrinsically linked to tariff classification, and unless the classification itself is questioned, the applicable tax entry cannot be altered.

Referring to the tariff structure reproduced in the order (pages 6–8), the Bench pointed out that CTH 8432 covers agricultural and horticultural machinery, including “other” machinery falling within its scope, which provided a basis for the importer’s classification.

The Tribunal further held that the department merely asserted that the goods did not fall under the claimed IGST entry but failed to establish that the classification under CTH 8432 was incorrect. This omission, it said, amounted to deemed acceptance of the importer’s classification.

Importantly, the Bench clarified that the same goods cannot be subjected to different tariff headings for Basic Customs Duty and IGST purposes. It also noted that although a potentially more specific classification under CTH 8438 (covering certain tea machinery) existed as reflected in the tariff extract on page 10 it was never proposed in the show cause notice and therefore could not be relied upon later.

On limitation, the Tribunal found that the extended period under Section 28(4) of the Customs Act had been wrongly invoked. The show cause notice lacked any concrete allegation of suppression, misstatement, or mala fide conduct. The Bench observed that the extended limitation appeared to have been invoked merely to overcome the time bar, which is legally impermissible.

Rejecting the Commissioner (Appeals)’ decision to remand the matter, the Tribunal upheld the adjudicating authority’s findings on both merits and limitation. It concluded that the demand was unsustainable and allowed the appeal in full.

Case Title: Sumitra Devi Kejriwal v. Commissioner of Customs (Airport & Administration), Kolkata
Case No.: Customs Appeal No. 75252 of 2024
Coram: R. Muralidhar (Judicial Member), Rajeev Tandon (Technical Member)