TGV SRAAC Limited Vs Commissioner of Customs (CESTAT Chennai)
Summary: The CESTAT Chennai disposed of two appeals filed by TGV SRAAC Ltd. (formerly, Sree Rayalaseema Alkalies and Allied Chemicals Ltd.), arising from two different orders in appeal dated 03.09.2015. Since both appeals involved the same issue, they were disposed of by a common order.
The appellant had filed Bills of Entry for clearance of “Lauric Acid”, classifying the goods under CTH 29157090 and claiming exemption under Notification No.12/2012-Cus., Sl.No.230A. After clearance, the Department issued Show Cause Notices under Section 28(1) of the Customs Act, 1962, proposing classification under CTH 29159090, denial of the exemption and recovery of differential duty with applicable interest. The Adjudicating Authority rejected the declared classification, ordered reclassification under CTH 29159090, denied the notification benefit and confirmed the differential duty demand with interest. The Commissioner of Customs (Appeals-II), Chennai rejected the appellant’s appeals and upheld the adjudication orders.
Before the Tribunal, the appellant submitted that Lauric Acid was used as raw material in the manufacture of toilet soaps and that its write-up concerning Lauric Acid had not been considered. It contended that the assessed Bills of Entry were appealable orders and that Revenue had not reviewed the assessments under Section 129D(2) of the Customs Act or filed an appeal before the Appellate Authority. The appellant also submitted that the reclassification was unsupported by any Customs Laboratory test, technical information or expert opinion.
The appellant further argued that “others” appeared at two places under Chapter Heading 2915 and that, under the General Rules of Interpretation and Note 3 of Chapter 29, Lauric Acid could not be classified under CTH 29159090. It relied on import data showing Lauric Acid being cleared under CTH 29157090 at various Customs ports and contended that customs law should be applied uniformly. Reliance was also placed on judicial decisions concerning competing tariff entries.
The Tribunal rejected the contention concerning the Department’s resort to Section 28(1), relying upon the Supreme Court’s decision in Commissioner of Customs v Canon India Pvt Ltd. The Supreme Court had held that, following the amendment of Section 17 by the Finance Act, 2011, the proper officer’s competence to conduct “assessment” had been taken away and that the amended provision empowered verification of self-assessment and subsequent reassessment where necessary. The Tribunal noted that proceedings under Section 28 are subsequent to the process under Section 17 and that Section 28 permits review of assessments and reassessments for determining short levy, non-levy, part-payment, non-payment or erroneous refund. Accordingly, the Tribunal held that Revenue was not precluded from invoking Section 28(1) to examine the correctness of the classification claimed by the appellant.
On the exemption issue, the Tribunal noted that the appellant had self-assessed the goods under tariff item 29157090 as “‘other palmitic acid stearic acid, their salts and esters” and claimed the concessional rate under Sl.No.230(A) of Notification No.12/2012-Cus. Although the notification described the eligible goods as “All goods for use in the manufacture of soaps and oleochemicals”, entitlement depended upon the imported Lauric Acid being covered by sub-heading 291570 referred to in the notification.
Relying upon the Supreme Court’s decision in CC(Import) v. Dilip Kumar & Company, the Tribunal reiterated that an exemption notification is to be interpreted strictly and that the burden of establishing applicability lies upon the assessee. The Tribunal therefore held that the appellant was required to demonstrate that the imported goods were classifiable under tariff item 29157090. It found the appellant’s reliance on Madhus Garage Equipments v CC (Appeals), Bangalore and Tamil Nadu Newsprint & Papers Ltd v CC misconceived in view of the law declared in the cited Supreme Court decisions.
The Tribunal also considered the evidentiary issue. The Adjudicating Authority had found that the appellant had not filed documentary evidence such as an analysis certificate, composition certificate or test report with the Bill of Entry to substantiate the claimed classification. Although the appellant disputed this finding and stated that the documents had been produced before the assessing authority, the Tribunal observed that the appellant had not annexed any such test report or document to the appeals to evidence its claim.
An extract from the Mcgraw-Hill Encyclopaedia of Science & Technology, 9th Edition, relied upon by the appellant, identified Lauric Acid as one of 30 saturated monocarboxylic acids. The Tribunal observed that the table separately indicated stearic acid and palmitic acid and found that the appellant had nevertheless failed to demonstrate through cogent evidence that the imported Lauric Acid fell within tariff item 29157090 as claimed. The Tribunal also rejected reliance upon website information concerning classifications adopted by others because the relevant assessed Bills of Entry and connected documents had not been produced to establish their veracity.
The Tribunal further rejected the appellant’s reliance on Collector of Customs, Madras Vs. Lotus Inks and Gonterman Peipers (India) Ltd. vs. Additional Secretary to the Govt. of India, finding that the appellant had not established the existence of two competing tariff entries applicable to the goods.
The Tribunal additionally referred to the Supreme Court’s decision in Commissioner of Customs (Import) v. M/s. Welkin Foods, which discussed the fundamental concepts governing classification of imported goods and analysed the General Rules of Interpretation. In particular, the Tribunal reproduced the Supreme Court’s observation that GRI 1 is the fundamental rule for navigating the HSN and that classification is to be determined by the terms of the headings and the relevant Section or Chapter Notes.
After examining the impugned order, the Tribunal found that the appellate authority had correctly reproduced the relevant chapter heading and had rightly denied the claimed classification and exemption. It also noted that the Adjudicating Authority had elaborately analysed the applicable Chapter 29 sub-heading note. According to the Tribunal, chapter sub-headings from 2915.11 to 2915.70 specifically covered certain saturated acyclic monocarboxylic acids and their derivatives, and Lauric Acid was not covered thereunder.
The Tribunal accepted the Revenue’s reliance on the coordinate-bench decision in M/s. Hindustan Unilever Ltd v. The Commissioner of Customs, Chennai II, where, in a similar dispute concerning Lauric Acid, the claim for classification under tariff item 29157090 against Revenue’s classification under tariff item 29159090 had been rejected.
Consequently, the Tribunal held that the impugned orders did not warrant interference and upheld them. The appeals were dismissed.
Cases Discussed
- Commissioner of Customs v Canon India Pvt Ltd, 2024 (390) E.L.T. 545 (S.C.)
- CC(Import) v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.)
- Madhus Garage Equipments v CC (Appeals), Bangalore, 2006 (198) ELT 388 (Tri-Bang)
- Tamil Nadu Newsprint & Papers Ltd v CC, 2010 (253) ELT 153 (Tri-Chennai)
- Collector of Customs, Madras Vs. Lotus Inks, 1996 (87) ELT 580 (SC)
- Gonterman Peipers (India) Ltd. vs. Additional Secretary to the Govt. of India, 1986 (26) ELT 471 (Calcutta)
- Commissioner of Customs (Import) v. M/s. Welkin Foods, 2026 INSC 19
- M/s. Hindustan Unilever Ltd v. The Commissioner of Customs, Chennai II, 2025-TIOL-425-CESTAT-MAD
FULL TEXT OF THE CESTAT CHENNAI ORDER
These two appeals preferred by the appellant TGV SRAAC Ltd. (formerly, Sree Rayalaseema Alkalies and Allied Chemicals Ltd.), albeit arising out of two different orders in appeal, both dated 03.09.2015, and heard on different dates; nevertheless involve the same issue, and are therefore disposed of by this common order.
2. The relevant facts are that the appellants had filed bills of entry for the clearance of “Lauric Acid” classified them under CTH 29157090 and availing exemption in terms of Notification No.12/2012-Cus. Sl.No.230 A and cleared the same. After clearance of the goods, the Department issued Show Cause Notices under Section 28 (1) of the Customs Act, 1962, proposing to change the classification to CTH 29159090, denying the benefit of Notification No.12/2012 ibid and demanding differential duties. After due process of law, the Adjudicating Authority rejected the classification made by the appellant, ordered reclassification under the proposed CTH, denied the benefit of the Notification and confirming the demand of differential duty along with applicable interest. Aggrieved by the same the appellant preferred appeals before the Commissioner of Customs (Appeals – II), Chennai who however, rejected the appeal and upheld the Order in Original. Aggrieved the appellants, having preferred these appeals, are now before this forum.
3. Shri K. Kumareshan, Ld. Advocate appearing on behalf of the appellants submitted that the appellant manufactures toilet soaps for which Lauric Acid is the raw-material. The Show Cause Notices issued alleging mis classification, proposing reclassification and demanding differential customs duty along with interest, in reply to which the appellant had submitted a write-up on Lauric Acid which was ignored.
4. The Ld. Counsel submits that the “assessed Bill of Entry” is an appealable order and Revenue has not reviewed the assessments of these Bill of Entry under Section 129D(2) of the Customs Act, 1962 and has not filed an appeal before the Appellate Authority. Reliance is placed on the decisions in Madhus Garage Equipments Vs. Commissioner of Customs (Appeals), Bangalore, 2006 (198) ELT 388 (Tri. – Bangalore). He would submit that the reclassification of Lauric Acid under CTH 29159090 is not based on any test conducted by Customs Laboratory or by any technical information / expert opinion.
5. It is submitted that the entry “others” appears in two places under Chapter Heading 2915. According to General Rules of Interpretation, ‘Lauric Acid” cannot be classified under CTH 29159090 which appears last in numerical orders as per Note 3 of Chapter 29. CTH 29159090 refers to “Caprylic and Caproic Acids” which are used in the perfumery industries. Whereas, Lauric Acid used in the manufacture of soaps does not fall under the same Genre. It is further submitted that import data of Lauric Acid cleared at various Customs Ports during the period January 2015 – July 2015 shows that Lauric Acid has been cleared under CTH 29157090. Customs Act being a Central Law must be applied uniformly throughout the country. It was further submitted that when there are two competing entries it is the option of the importer to choose whichever option is beneficial to him. Reliance is placed on the decisions in Collector of Customs, Madras Vs. Lotus Inks 1996 (87) ELT 580 (SC), Gonterman Peipers (India) Ltd. vs. Additional Secretary to the Govt. of India, 1986 (26) ELT 471 (Calcutta).
6. Ms. Anandalakshmi Ganeshram, Ld. Authorised Representative and Ms.Rajini Menon, Ld. Authorised Representative reiterated findings of the impugned order in appeal. Reliance was placed on the decisions in Hindustan Universal Ltd. Vs. Commissioner of Customs, Chennai 2025 – TIOL 435 – CESTAT – MAD.
7. Heard both sides, perused the appeal records and the decisions submitted.
8. The issue in common that arises for our consideration is whether the rejection of the declared classification of the impugned goods is tenable.
9. Admittedly the appellant had filed bills of entry for clearance of goods declared as “Lauric Acid” classifying them under tariff item 29157090 as ‘other palmitic acid stearic acid, their salts and esters” and self-assessed the goods to duty under the said tariff item to BCD @0% vide Sl.No.230(A) of Notification No.12/2012-Cus, CVD @ 12% and Special Additional Duty @ 4%. It is also the case of the appellant that are registered under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 vide registration certificate dated 17.07.2014 issued consequent to their application indicating the availment of benefit of Sl.No.230A of Notification No.12/2014-Cus dated 11.07.2014 undertaking to use the said imported Lauric Acid for the manufacture of Soap Noodles executing the necessary bond undertaking, interalia, to pay on demand the duty leviable on such quantity of the imported goods in the event of their failure to use the imported Lauric Acid as stated. It is further their case that the proper officer has neither verified, examined or tested the goods or directed the appellant to produce any other documents or furnish any other information required for ascertaining the duty leviable on the imported goods. Reliance is placed on the Board’s Circular No.17/2011-Cus to contend that the procedure prescribed is that upon verification, examination or testing of goods if it is found that the assessment has not been done correctly, the proper officer would reassess the duty leviable on such goods and in the present case there was no testing or reassessment of the imported goods and that therefore without challenging the assessment so made by filing an appeal before the Commissioner (Appeals) the Department could not have taken recourse to Section 28(1) of the Act.
10. We do not find any merit in the said contention of the appellant in light of the decision of the Hon’ble Supreme Court in Commissioner of Customs v Canon India Pvt Ltd, 2024 (390) E.L.T. 545 (S.C.), wherein, after examining the changes introduced in Section 17 as amended vide the Finance Act 2011 vis -a-vis the unamended provisions of Section 17, the Apex Court held as under:
“90. These changes highlight that the competence of the proper officer to conduct “assessment” is completely taken away by the legislature vide the amendment to Section 17. The new Section 17 empowers the proper officer to perform the functions of verification of self-assessment and subsequent re-assessment, if found necessary. However, such re-assessment is not a mandatory function on the same footing as “assessment” under the old Section 17. Therefore, in our considered view the scope of the functions of the proper officer under the new Section 17 is limited.”
11. The Apex Court has further held that the proceedings under Section 28 are subsequent to the completion of the process set out in Section 17 of the Act, 1962. The procedure envisaged under Section 28 is in the nature of a quasi-judicial proceeding with the issuance of the show cause notice by the proper officer followed by adjudication of such notices by the field customs officers. The Apex Court had also held that the ambit of Section 28 has also been restricted to the review of assessments and re-assessments done under Section 17 for ascertaining if there has been a short-levy, non-levy, part-payment, non-payment, or erroneous refund. Furthermore, the Circular No.17/2011-Cus dated 08-04-2011 relied on by the Appellant also states inter-alia that under the new scheme of self-assessment, the Bill of Entry or Shipping Bill that is self-assessed by importer or exporter, as the case may be, may be subject to verification with regard to correctness of classification, value, rate of duty, exemption notification or any other relevant particular having bearing on correct assessment of duty on imported or export goods, selectively on the basis of the output of the Risk Management System (RMS). Therefore, as held by the Apex court, when the ambit of Section 28 allows for review of assessments and reassessments under Section 17, Revenue is not precluded from resorting to Section 28(1) to review the assessment for ascertaining if there has been a short levy, and such review would also take in its fold the aspect of the correctness of the classification claimed by the appellant.
12. Concededly, the appellant classified the “Lauric Acid” imported under tariff item 29157090 as ‘other palmitic acid stearic acid, their salts and esters” and self-assessed the goods to the concessional rate of duty claiming that the goods are covered under Sl.No.230(A) of Notification No.12/2012-Cus. The description of the goods against the said Sl.No.230A no doubt is “ All goods for use in the manufacture of soaps and oleochemicals”, but the appellant’s entitlement to the same hinges on the Lauric Acid imported being covered under the said chapter sub heading 291570, the sub heading referred to in the said Sl.No.230 (A). Given that the Honourable Supreme Court in CC(Import) v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.) has held that exemption notification is to be interpreted strictly and that the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification, we are of the firm opinion that it is for the appellant to show that the goods imported are classifiable under tariff item 29157090 as claimed. Given the law declared by the Apex Court in Canon Case and Dilip Kumar case cited supra, the reliance placed by the appellant on the Tribunal decision in Madhus Garage Equipments v CC (Appeals), Bangalore, 2006 (198) ELT 388 (Tri-Bang) and Tamil Nadu Newsprint & Papers Ltd v CC, 2010 (253) ELT 153 (Tri-Chennai), is misconceived and these decisions are not applicable to the facts of the case at hand.
13. We also find that the Adjudicating Authority had held that the Appellant had not filed the documentary evidences such as analysis certificate and also the composition certificate or test report along with the bill of entry to substantiate the claimed classification, which is stated to be the requirement against the prescribed check list at Sl.No.13 of the self-assessment procedure. The Appellant has contested the said finding stating that the requisite documents were produced before the assessing authority. However, we find it strange that the appellant has not chosen to annex to these appeals preferred, any such test report or document that would evidence the appellant’s claim that Lauric Acid is classifiable under tariff item 29157090 as ‘other palmitic acid stearic acid, their salts and esters”.
The Appellant has annexed extract from Mcgraw-Hill Encyclopaedia of Science & Technology, 9th Edition, wherein Lauric Acid is listed as one of the 30 saturated monocarboxylic acids. Pertinently, the table itself indicates stearic acid and palmitic acid separately. The appellant contends, placing reliance on the said extracts that Lauric Acid belongs to the family of saturated acyclic monocarboxylic acids. However, we find that the appellant has not been able to demonstrate placing cogent evidence that the lauric acid imported would come under tariff item 29157090 as “‘other palmitic acid stearic acid, their salts and esters” as claimed by the appellant. We are also of the view that the appellant’s reliance on some information downloaded from a website to contend that similar classification has been adopted by others cannot be countenanced as the veracity is indeterminable in the absence of the relevant assessed bills of entry and connected documents evidencing the same. Likewise, the reliance placed on the decisions in Collector of Customs, Madras Vs. Lotus Inks 1996 (87) ELT 580 (SC), Gonterman Peipers (India) Ltd. vs. Additional Secretary to the Govt. of India, 1986 (26) ELT 471 (Calcutta) are also misconceived as the appellant has not been able to make out a case that there are two competing entries that may be applicable.
14. We also notice that the Honourable Supreme Court, in its decision in the case of Commissioner of Customs (Import) v. M/s. Welkin Foods, reported as 2026 INSC 19, has while comprehensively discussing the fundamental concepts that govern classification of goods imported into India, also analysed the General Rules of Interpretation, and has, inter-alia, held as under:
“28. GRI 1 is the fundamental rule for effectively navigating the HSN. The influence of GRI 1 is pervasive and forms the basis for customs classification of goods under the Act, 1975. GRI 1 states that: (i) headings of sections, chapters and subchapters are for reference only and (ii) for legal purposes, the classification shall be determined by the terms of headings and the relevant section or chapter notes. Thus, GRI 1 essentially establishes the primacy of the notes and terms of headings for determining the classification of a product.”
15. We have scrupulously examined the impugned order and find that the appellate authority has after reproducing the relevant chapter heading rightly denied the classification as well as the benefit of the exemption claimed by the appellant and upheld the order of the Adjudicating Authority, which too had elaborately analysed the applicable chapter sub heading note 1 of Chapter 29. We find that the chapter sub-heading from 2915.11 to 2915.70 specifically cover certain saturated acyclic monocarboxylic acid and their derivatives, and lauric acid is not covered thereunder. We find that the Ld. A.R has rightly placed reliance on the decision of a coordinate bench of this Tribunal as reported in M/s. Hindustan Unilever Ltd v. The Commissioner of Customs, Chennai II, 2025-TIOL-425-CESTAT-MAD. It is seen that in this case, where revenue classified Lauric Acid under Tariff Item 29159090 as against the appellant’s claimed classification of 29157090, similar to the instant case; this Tribunal had come to the conclusion that the claim of classification of Lauric Acid imported under Tariff Item 29157090 as claimed by the appellant therein, cannot be countenanced and had rejected the appeals.
16. In view of the discussions above, we are of the considered view that the impugned orders do not warrant any interference and uphold the same.
Resultantly, the Appeals are dismissed.
(Order pronounced in open court on 19.01.2026)
