CESTAT Chennai Allows Toyota Sensor Classifications and Sets Aside Customs Penalties

Toyota Kirloskar Motors Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)

Summary: The CESTAT, Chennai considered three connected appeals arising from common Order-in-Original No. 108828 of 2024 dated 30.08.2024 concerning classification of sensors imported by Toyota Kirloskar Motors Pvt. Ltd. (TKML) and related penalties on co-appellants. The dispute followed DRI investigation into different classifications adopted for identical sensor components during January 2019 to June 2023. The show cause notice dated 27.09.2023 proposed reclassification, recovery of alleged short-paid customs duty with interest, and penalties under Sections 112(a), 114A and 114AA of the Customs Act, 1962.

The confirmed differential-duty figure in the impugned order was ₹53,77,10,133, while ₹12,61,51,401 had been voluntarily deposited during the proceedings. On classification merits, the Tribunal held that the three temperature sensors—Exhaust Gas Temperature, Water Temperature and Inlet Air Temperature—were classifiable under CTI 8533 4030 as thermistors because the Department had not established by technical evidence that the imported assemblies themselves performed the conversion or calibration necessary to constitute complete thermometers under Heading 9025; Heading 9031, being residuary, could not be preferred. The Oxygen, Air-Fuel Ratio and Nitrogen Oxide sensors were held classifiable under CTI 9027 1000 as gas-analysis apparatus. The Sensor Assy Brake Pedal was held classifiable under CTI 9031 8000, while the Retainer Ultrasonic Sensor was held classifiable under CTI 8708 9900. The Sensor Speed was held classifiable under CTI 8543 7099 because it detected magnetic-field variation and generated an electrical/digital signal, while the ECU subsequently determined wheel speed.