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Quashes ₹23.17 Crore Customs Demand Against Toyota Over Parts Classification
The delivered a decisive ruling in favour of , setting aside a staggering ₹23.17 crore customs duty demand, along with the of goods valued at over ₹170 crore, a of ₹17 crore, and a under . The Tribunal held that the Revenue had failed to discharge its that 226 imported motor vehicle parts should be reclassified under a different tariff heading, and that the was unavailable.
Background of the Dispute
Toyota Kirloskar Motor, a leading automobile manufacturer, imported various motor vehicle parts and accessories from its group companies in Thailand, Indonesia, and the Philippines between and . The company declared these goods under and cleared them at a concessional duty rate of 5% under , relying on certificates of origin issued under the ASEAN-India Free Trade Agreement.
The , however, proposed of 226 parts—principally under , which covers parts and accessories of motor vehicle bodies. The Department based its proposal on technical write-ups and information available on Toyota's website. The adjudicating authority accepted this , confirming a differential duty demand of ₹23.17 crore, ordering of the goods, imposing a of ₹17 crore, and levying a under Section 114A.
The Classification Dispute
Toyota challenged the order before CESTAT, contending that the Department had not discharged the burden of establishing that the imported goods fell under the proposed tariff heading. The company pointed out that the Department had examined only about 15 representative parts but had applied its conclusions to all 226 articles without any article-specific analysis.
The Tribunal agreed with Toyota's submission. It observed that the Revenue must establish, on an article-specific basis, that the imported goods fall under the proposed tariff heading. The Bench, comprising Technical Member Vasa Seshagiri Rao and Judicial Member Ajayan T.V., stated:
“...the classification of the 226 articles listed in Annexure A to the , under as declared by the appellant, save for such of them as were declared under another heading, holds the field, and the benefit of dated in respect of those imports is held available to the appellant…”
The Tribunal further held that the adjudicating authority had relied on Toyota's website without placing the relevant material on record or confronting the company with it. An annexure listing the parts, along with technical descriptions and references to the website, could not by itself establish the proposed classification. Relying on Supreme Court precedents on classification, the Bench emphasised that the classification exercise must begin with the , the relevant , and the .
Burden of Proof Remains on Revenue
A critical aspect of the ruling was the reaffirmation of the principle that the lies on the Revenue and does not shift merely because the importer does not rebut the material relied upon by the Department. The Tribunal noted that the Department had failed to provide article-specific findings to establish why each of the 226 parts qualified as parts or accessories of vehicle bodies. This failure was fatal to the Department's case.
and Issues
The Tribunal also addressed the issue of . It held that the extended period under was unavailable because the Department's case itself relied on technical information supplied by Toyota and material published on its website. Such information could not simultaneously be treated as having been suppressed by the importer. The Bench further ruled that a classification claim, where the description of the goods has been correctly declared, does not by itself amount to or .
Regarding the issued on , which introduced 14 additional parts covering 81 bills of entry and substantially altered the computation of the demand, the Tribunal held that a cannot be used to enlarge a . For the newly introduced goods, had to be reckoned from the date of the , making the demand .
Additionally, the Tribunal found errors in the computation of the demand and noted that the adjudicating authority had failed to properly account for duty payments already made by Toyota.
Impact on Legal Practice
This ruling serves as a significant reminder to customs authorities that demands must be supported by rigorous, item-specific evidence. The decision reinforces the principle that the Revenue cannot rely on generalised assumptions or website materials without confronting the importer and placing the evidence on record. For importers, the judgment provides strong precedent that a correct declaration of goods does not automatically expose them to allegations of suppression, especially when the Department itself uses the importer's information to build its case.
The Tribunal's stance on the also clarifies that show cause notices cannot be expanded through subsequent amendments without fresh periods, which will likely influence how customs authorities draft and modify such notices in the future.
Conclusion
By setting aside the entire —including the differential duty demand, interest, , , and —the Bench has delivered a comprehensive victory for Toyota Kirloskar Motor. The ruling underscores the importance of and the need for the Revenue to meet its in classification disputes. Legal professionals handling customs litigation will find this judgment a valuable reference on burden of proof, , and the proper scope of show cause notices.
