The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Mumbai has set aside a differential customs duty demand of ₹85,28,035 against Unibourne Food Ingredients, resolving a protracted classification dispute regarding the import of brown rice protein powder. The tribunal ruled that the product is appropriately classifiable under Customs Tariff Item (CTI) 3504 0099, rejecting the Revenue’s attempt to reclassify the imports under the higher-taxed CTI 2106 1000. This decision effectively quashes not only the duty demand but also the associated interest, penalties, and redemption fines imposed by the adjudicating authority.

The dispute originated from imports conducted by the company between September 2022 and June 2024. While the importer had self-assessed the goods under CTI 3504, which attracts a Basic Customs Duty (BCD) of 20%, the Special Intelligence and Investigation Branch at Nhava Sheva initiated an inquiry, contending the goods were protein concentrates classifiable under CTI 2106, which carries a 40% BCD. The Principal Commissioner of Customs had initially upheld the reclassification, alleging that the importer had suppressed facts and misclassified the goods to evade duty. The tribunal’s order on November 2, 2026, overturns these findings, emphasizing that the Revenue failed to discharge the burden of proof required to displace the importer’s original classification.

Technical Evidence and Expert Opinion Central to the tribunal’s decision was the reliance on a technical clarification issued by the Indian Institute of Technology (IIT), Kharagpur, on December 20, 2021. The appellant had submitted this document to the adjudicating authority, asserting that the brown rice protein powder contained specific cereal proteins—glutelins and prolamins—which fall squarely within the scope of "other protein substances" covered by CTH 3504. The tribunal observed that the adjudicating authority had dismissed this expert opinion based on subjective, generalized assumptions without conducting any independent laboratory testing or providing a counter-expert opinion.

The Bench led by Judicial Member Ajay Sharma and Technical Member M.M. Parthiban stated, "We find that, in the present case, in light of the Clarification issued by IIT, Kharagpur, it is clear that the imported Brown Rice Protein Powder constitute 'Other Protein Substances', which from a perusal of the rival entries, is more specifically covered under CTH 3504." The tribunal further noted that the adjudicating authority ’s decision to override expert evidence with its own subjective interpretation violated established legal precedents set by the Bombay High Court .

Flaws in the Revenue’s Tariff Interpretation The tribunal addressed the Revenue’s reliance on Harmonized System of Nomenclature (HSN) explanatory notes, specifically paragraph (B)(6) of CTH 2106, which relates to protein isolates with at least 90% protein content. The Revenue had argued that because the imported brown rice protein had an approximate protein content of 80%, it could not be classified under CTH 3504. The tribunal clarified that the 90% threshold mentioned in the HSN notes is a general observation for protein isolates from vegetable substances and not a mandatory condition for cereal proteins, which are governed by different provisions under Note (B)(1) of CTH 3504.

Furthermore, the tribunal rejected the Revenue’s argument that the goods qualified as "textured" protein substances under CTI 2106. The Bench pointed out that the definition of textured protein under HSN explanatory notes specifically refers to forms such as chunks, pellets, nuggets, or flakes. Since the imported product was in powder form, the attempt to force it into the "textured" category under CTI 2106 was found to be factually incorrect and unsustainable. Applying Rule 3(a) of the General Rules of Interpretation, the tribunal determined that CTH 3504 provided the most specific description for the commodity, thereby taking precedence over the broader heading of 2106.

No Mala Fide Intent in Self-Assessment Regarding the allegation of suppression of facts and the invocation of the extended period of limitation under Section 28(4) of the Customs Act, 1962, the tribunal found the Revenue’s stance unjustified. Because the appellant had declared the goods accurately as brown rice protein powder on all Bills of Entry, there was no misdescription of the nature of the product. The tribunal reaffirmed that a difference of opinion on the correct classification of goods, based on a complex interpretation of tariff headings, does not constitute wilful misstatement or fraudulent suppression of facts.

Regarding the confiscation of the goods and the imposition of a ₹10,00,000 redemption fine, the tribunal noted that the goods were not even available for confiscation, having already been cleared for home consumption. Drawing on established jurisprudence, including the decision in Lewek Altair Shipping Pvt. Ltd. v. Commissioner of Customs , the tribunal reiterated that claiming a classification that does not align with the Customs department's view does not justify the seizure of goods or the imposition of penalties, especially in the absence of any established malfeasance.

"The Customs Tariff Heading indicated in the Bill of Entry is only a self assessment by the appellant as per his understanding which is subject to re-assessment by the officers if necessary," the tribunal stated in its concluding observations. By ruling that the burden of establishing an alternative classification rests solely with the Revenue—a burden it failed to meet in this instance—the CESTAT has effectively provided relief to the appellant. The final order directs that all penalties and demands against Unibourne Food Ingredients be vacated, concluding the matter in favour of the importer.