The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata has ruled that face recognition access control terminals fall under Customs Tariff Heading 8471 as Automatic Data Processing (ADP) Machines, rejecting the department’s stand that the devices should be classified as electrical machinery under CTH 8543. As a result, the Tribunal set aside differential customs duty demands, interest, confiscation orders and penalties imposed on the importing companies and their directors and customs house agents. The decision is expected to benefit importers of biometric and AI-driven access control hardware.
The dispute began when a consignment imported by Face IT Systems LLP from China was detained by the SIIB on the allegation that the declared description “Data Collection Terminal (based on face recognition)” was intended to claim NIL basic customs duty under Notification No. 24/2005 by classifying the goods under 84716090. The department asserted that the devices should instead fall under 8543 and attract 7.5 percent duty. Similar proceedings were also initiated against Fortuna Impex Pvt. Ltd., resulting in show cause notices alleging misclassification and seizure of goods. The adjudicating authority confirmed the duty and penalties, and the Commissioner (Appeals) upheld these findings.
On appeal, the Tribunal examined detailed technical reports from STQC IT Services (ERTL-East) and the Department of Power Engineering, Jadavpur University, which confirmed that the equipment features 4GB RAM, 64GB internal storage, operates on embedded Linux, processes and converts facial images into Base-64 biometric data, runs automated programs independently, stores and evaluates data, and performs logical decision-based operations. Holding that these capabilities satisfy the requirements under Chapter Note 6(A) to Chapter 84, the bench ruled that the goods qualify as ADP machines rather than electrical apparatus under Chapter 85. It observed that the products are not comparable to conventional electrical appliances but are sophisticated microcomputer-based systems.
The Tribunal also found that the extended limitation period could not be invoked because the dispute pertained to classification rather than suppression or intent to evade duty. It noted that the classification adopted was supported by precedent and reiterated that when goods are self-assessed, the department must challenge the assessment through appellate procedures instead of reopening Bills of Entry, referring to the Supreme Court decision in ITC Ltd. Once the demand was held time-barred, confiscation and penalties automatically failed.
Allowing the appeals, the Tribunal directed classification under CTH 8471, struck down the demand raised under CTH 8543, and granted consequential relief.
Appearance:
Counsel for Appellant: S. C. Ratho
Counsel for Respondent: A. K. Choudhary
Cause Title: M/s Face IT Systems LLP v. Commissioner of Customs (Airport & ACC), Kolkata
Case No: Customs Appeal No. 76501 of 2025
Coram: R. Muralidhar (Judicial Member), K. Anpazhakan (Technical Member)
