2025 (7) TMI 1269 - AT - Customs

Demand of differential duty by invoking the extended period of limitation under sub-section (4) of Section 28 of the Customs Act 1962 with interest and penalty - section 28(4) of the Customs Act 1962 - levy of penalty. Whether the ELISA test kits imported by the appellant for food testing were entitled to the benefit of the Exemption Notification? - HELD THAT - This issue was considered by a division bench of this tribunal in Ilishan Biotech 2024 (11) TMI 740 - CESTAT NEW DELHI and it was held that the ELISA test kits imported for food testing would not be entitled for the benefit of the Exemption Notification - the ELISA test kits imported by the appellant for testing food products would not be entitled to the benefit of the Exemption Notification. It is seen that neither in the reply sent by the appellant to the show cause notice (even though this reply was not considered by the Principal Commissioner) nor in this appeal the appellant has stated that it had also imported ELISA test kits for veterinary purpose. In this view of the matter it would not be appropriate to examine whether the appellant had imported test kits for veterinary purpose which issue has been raised by the learned counsel for the appellant during the course of hearing of the appeal. Whether the extended period of limitation could have been invoked and whether penalty could be imposed upon the appellant under section 114A of the Customs Act? - HELD THAT - The appellant may not have filed any reply to the show cause notice but it was obligatory on the part of the Principal Commissioner to have examined whether the averments made in the show cause notice make out a case for invoking the extended period of limitation. The appellant had clearly indicated in the Bills of Entry that the goods were diagnostic kits and in some of the Bills of Entry that these ELISA test kits were for food testing. This aspect was also noticed by the Principal Commissioner in the earlier order passed which was assailed in Ilishan Biotech 2024 (11) TMI 740 - CESTAT NEW DELHI . The appellant may or may not have been entitled for the benefit of the Exemption Notification but what was required to be examined was whether the appellant had suppressed material facts with an intent to evade payment of customs duty. Once a finding was recorded on the same set of facts by the Principal Commissioner in the earlier order that the extended period of limitation could not be invoked there was no reason for the Principal Commissioner to record different in the subsequent order merely because the appellant had not filed any reply to the show cause notice - The Principal Commissioner was therefore not justified in holding that the extended period of limitation was correctly invoked. Penalty upon the appellant under section 114A of the Customs Act could not have been invoked since the reasons for imposing penalty under section 114A of the Customs Act and the reasons for invoking the extended period of limitation under section 28(4) of the Customs Act are same - The imposition of penalty under section 114A of the Customs Act therefore cannot be sustained. The order dated 25.05.2022 passed by the Principal Commissioner denying the benefit of the Exemption Notification is upheld for the normal period. However as the extended period of limitation could not have been invoked the confirmation of duty for the extended period of limitation is set aside. The imposition of penalty under section 114A of the Customs Act is also set aside - Appeal allowed.

Summary

ISSUES:

Whether ELISA test kits imported for food testing qualify as "diagnostic test kits" eligible for exemption under the relevant Customs Exemption Notifications.Whether the extended period of limitation under Section 28(4) of the Customs Act, 1962, can be invoked for demand of differential duty on the basis of alleged misdeclaration or suppression of facts.Whether penalty under Section 114A of the Customs Act, 1962, can be imposed for misdeclaration or suppression of facts in relation to customs duty liability.Whether the importer's claim of exemption for ELISA kits used for veterinary purposes requires separate consideration.

RULINGS / HOLDINGS:

ELISA test kits imported for food testing do not fall within the term "diagnostic test kits" as used in the exemption notifications, which are limited to kits related to diagnosis of illness in humans and animals; therefore, such food testing kits are not entitled to exemption.The extended period of limitation under Section 28(4) was wrongly invoked because the importer had declared the goods as food testing kits on the Bills of Entry, and mere incorrect claim of exemption does not amount to suppression or mis-statement of facts warranting extended limitation.Penalty under Section 114A of the Customs Act cannot be sustained as it is contingent upon the same conditions that justify invocation of the extended period of limitation, which were not met.The issue of exemption for ELISA test kits imported for veterinary use was not considered, as the importer did not raise this claim in the reply to the show cause notice nor during the appeal proceedings.

RATIONALE:

The Court applied the plain language of the Customs Exemption Notifications (No. 12/2012-Cus and No. 50/2017-Cus) and relied on the interpretation that the term "diagnostic test kits" is confined to those used for medical diagnosis in humans and animals, excluding kits for food testing.Precedent from a division bench decision was followed, which held that ELISA kits for food testing are not covered by the exemption, supported by reference to Harmonized System Nomenclature (HSN) explanatory notes and dictionary definitions of "diagnostic".The Court emphasized that invocation of the extended period of limitation under Section 28(4) requires proof of collusion, wilful mis-statement, or suppression of facts, which was absent as the importer had declared the goods' true nature on the Bills of Entry.Penalty under Section 114A was held to be dependent on the same conditions as extended limitation and thus could not be imposed without justification for extended limitation.The Court declined to consider the veterinary use exemption claim due to lack of prior notice or opportunity for the department to address the issue, underscoring procedural fairness.