CESTAT Sets Aside ₹31.40 Lakh Demand on K.A. Enterprises, Says Excess Imports Allegation Unsustainable Without Officer Accountability

April 10, 2026 : The Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi, has set aside a customs duty demand of ₹31.40 lakh against K.A. Enterprises, holding that allegations of excess imports under the IGCR framework cannot be sustained in the absence of any finding on how such clearances were permitted by customs authorities.

The dispute arose from imports made between October 2018 and June 2021, where the appellant, engaged in the manufacture of sanitary napkins, imported super absorbent polymers and untreated fluff pulp under Notification No. 50/2017-Cus. by availing concessional duty subject to compliance with the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. The Department alleged that while 452 MT of untreated fluff pulp was imported, declarations under Rule 5 were filed only for 150 MT, thereby treating the balance as excess imports and raising a demand under Section 28(4) of the Customs Act along with interest and penalty.

The Tribunal examined the statutory scheme of the IGCR Rules and noted that concessional clearance at the port is intrinsically linked to prior approval and communication between the jurisdictional and port customs authorities. It observed that an importer cannot independently clear goods at concessional duty beyond declared quantities unless such clearance is permitted by the concerned officers.

The Bench comprising Justice Dilip Gupta and P. V. Subba Rao held that if excess quantities were indeed cleared, the responsibility would lie either with the jurisdictional officer who transmitted incorrect details or the port officer who allowed clearance beyond permissible limits. However, neither the show cause notice nor the impugned order identified any such lapse.

The Tribunal recorded that there was no dispute regarding the eligibility of the goods for exemption or their actual use for the intended purpose. It further noted that Rule 8 of the IGCR Rules, which provides for recovery in cases of misuse, was not attracted since the goods were duly utilized.

Rejecting the Department’s case as unsupported by evidence, the Tribunal held that in the absence of any finding fixing responsibility on customs officers, the demand could not be confirmed. The impugned order dated February 28, 2024 was accordingly set aside and the appeal was allowed.

Case Title: K.A. Enterprises v. Commissioner of Customs, Indore
Case No.: Customs Appeal No. 50622 of 2024