EPCG Exemption Not Lost Over Tariff Heading Mismatch for Rolling Mill Spools: CESTAT Chandigarh

CESTAT Chandigarh allowed EPCG exemption on spools imported as rolling mill parts, holding that capital goods authorised by DGFT qualify irrespective of tariff classification, so no duty, penalty or fine arose.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, has held that capital goods imported against an Export Promotion Capital Goods (EPCG) authorisation remain eligible for the exemption even if Customs classifies them under a tariff heading different from the one in the authorisation. Where the goods are described the same way in the authorisation and the bill of entry, and are not in the negative list, the exemption applies [Chiripal Poly Films Ltd. v. Commissioner of Customs, Ludhiana, 2026-juristway.com-3327-CESTAT(Chandigarh)-Customs].

The Bench of Somesh Arora, Member (Judicial), and P. Anjani Kumar, Member (Technical), heard the appeal; the order was written by Mr. Anjani Kumar. The appellant imported 60 spools for its rolling mill under an EPCG authorisation, classified them under CTH 8455 9000 as parts of rolling mills, and claimed exemption under Notification No. 26/2023-Cus. Customs held that steel spools fall under CTH 7326 9099, which was not in the authorisation, seized the goods on 4 Dec 2024, alleged misdeclaration, and demanded duty with penalty and redemption fine.

The Tribunal noted that paragraph 5.1(a) of the Foreign Trade Policy allows import of capital goods under EPCG except those in the negative list in Appendix 5F, and the Revenue did not claim the spools were in that list. The Customs Act does not define capital goods. It applied the reasoning of JSW Steel Ltd. (2016) on the SHIS scheme, followed in Jindal Stainless Ltd. (2025), that eligibility turns on the goods being capital goods, irrespective of classification.

On classification, the Tribunal saw force in the appellant’s argument. Note 1(c) to Section XVI excludes spools only as “similar supports” for material, not machine parts essential to manufacture. The Revenue had also not shown the spools were made by the simple processes covered by heading 7326. As the exemption applied irrespective of classification, the Tribunal did not decide the heading.

With the exemption available, the allegation of misdeclaration with intent to evade fell away. The demand, penalty and redemption fine were set aside and the appeal was allowed.

2026-juristway.com-3327-CESTAT(Chandigarh)-Customs