Misclassification of Correctly Described Goods Is Not Suppression; No Fine Without Goods: CESTAT Mumbai

CESTAT Mumbai set aside a ₹85,28,035 differential duty demand on brown rice protein powder, holding the Revenue failed to displace the importer’s classification backed by an IIT Kharagpur opinion.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, has held that the extended period under Section 28(4) of the Customs Act, 1962 cannot be invoked where imported goods are correctly described and the dispute is only about classification. It also held that confiscation under Section 111(m) and a redemption fine under Section 125 cannot rest on misclassification alone [Unibourne Food Ingredients v. Commissioner of Customs (NS-I), Raigad, 2026-juristway.com-3344-CESTAT(Mumbai)-Customs].

The Bench of Ajay Sharma, Member (Judicial), and M.M. Parthiban, Member (Technical), with the order written by Mr. Sharma, heard the importer’s appeal. Between September 2022 and June 2024 it imported brown rice protein powder under 10 bills of entry, classifying it under CTI 3504 0099 at 20% basic customs duty. Following an SIIB enquiry, a show cause notice (SCN) dated 1 Jan 2025 proposed CTI 2106 1000 at 40%. The order dated 26 Dec 2025 confirmed ₹85,28,035 with interest and equal penalty under Section 114A, confiscated the goods and imposed a redemption fine of ₹10,00,000.

The Tribunal held that the burden of proving classification lay on the Revenue, citing Hindustan Ferodo Ltd. v. Collector of Central Excise, Bombay (1997). Protein content of about 80% was undisputed. HSN Explanatory Note (B)(1) to heading 3504 covers cereal proteins such as glutelins and prolamins irrespective of protein content, and a technical clarification from IIT Kharagpur said these were the main proteins in the product. The Department had done no testing and offered no counter-opinion, and could not brush the expert view aside, as held in Mahindra & Mahindra Ltd. v. Union of India (2026).

The Tribunal found that the note to heading 2106 covers only textured protein substances, not powder, and that the 90% protein figure applies to vegetable protein isolates and is only “generally” met. Rule 3(a) of the General Rules of Interpretation favoured heading 3504, and Rule 4 could not be applied without first ruling out Rules 1 to 3. United States customs rulings were at best persuasive, and were divergent.

On limitation, the goods were correctly described and cleared without dispute, and the issue was complex and interpretive, so no suppression could be alleged. On confiscation, the only ground was misdeclared classification; the Tribunal followed Lewek Altair Shipping Pvt. Ltd. v. Commissioner of Customs, Vijayawada (2019) and noted that the jurisdictional Bombay High Court bars a redemption fine where goods are not available for confiscation.

The order was set aside and the appeal allowed with consequential relief.

2026-juristway.com-3344-CESTAT(Mumbai)-Customs