2026-VIL-1244-CESTAT-CHE-CU
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CUSTOMS CESTAT Cases

Customs - Classification of ophthalmic instruments - Appellant imported Operation Microscopes, Lensmeters and Chart Projectors and classified them under Heading 9018 as ophthalmic instruments, which was accepted by the Department at the time of clearance. Department subsequently based on audit objection proposed reclassification under Headings 9011, 9031 and 9008 - Whether the goods are correctly classifiable under Heading 9018 or under the alternate headings – HELD - The goods are specialized ophthalmic instruments designed for ophthalmic surgical procedures and clinical examination of the eye. HSN Explanatory Notes specifically exclude ophthalmic binocular-type microscopes from Heading 9011 and expressly include them under Heading 9018. Lensmeters are specialized ophthalmic diagnostic instruments integral to eye treatment and fall within Heading 9018 rather than residuary Heading 9031. Chart Projectors are specialized ophthalmic devices for projecting visual acuity charts in clinical environment and form part of eye testing systems covered under Heading 9018 not general-purpose projectors under Heading 9008. Product catalogues establish that goods are designed, marketed and configured as ophthalmic surgical instruments with features uniquely aligned to ophthalmic procedures - Classification must be based on primary function and essential character, not hypothetical alternate uses. Subsequent classification of identical goods under Heading 9018 by department reinforces correctness of appellant's classification. Classification adopted by appellant is legally sustainable and reclassification proposed is set aside – The appeal is allowed - Extended period of limitation - Invocation without suppression or wilful misstatement - Appellant imported goods over prolonged period with consistent declarations as ophthalmic instruments under Heading 9018 supported by product catalogues and technical literature. Goods were examined and assessed by customs officers on multiple occasions and classification was accepted - Department later sought to invoke extended period of limitation on allegation of intentional misclassification and suppression of facts. Whether extended period of limitation was rightly invoked – HELD – The invocation of extended period is contingent upon existence of collusion, wilful misstatement or suppression of facts with intent to evade duty. Burden lies on Revenue to establish these elements. Appellant had disclosed all material particulars in Bills of Entry. Contemporaneous examination reports establish that goods were physically opened and examined by customs authorities with verification of description including model numbers and specifications. Assessment was not mechanical acceptance but involved officers raising queries and seeking product catalogues and technical details. Department was fully aware of nature, description and use of goods at time of clearance. Dispute is purely interpretational in nature arising from difference of opinion on classification. Similar audit objection was raised and closed by department in 2015 demonstrating prior awareness and acceptance. Where issue has been previously examined and accepted by department, extended period cannot be invoked on same set of facts. In absence of evidence of suppression or wilful misstatement, extended period is not rightly invoked and demand is barred by limitation - Confiscation, redemption fine and penalties in absence of misdeclaration – HELD – The confiscation under Section 111(m) requires misdeclaration which involves incorrect declaration of value, quantity or description of goods. In present case description of goods is not disputed and dispute relates only to classification which is interpretational. Concept of redemption fine arises when goods are available for redemption - Power to impose redemption fine is not automatic and must be exercised judiciously keeping in view factual matrix including availability of goods and nature of alleged contravention. Penalty under Section 114A requires mens rea and is attracted only when duty has not been levied or short-levied by reason of collusion, wilful misstatement or suppression of facts. In present case contemporaneous records clearly demonstrate that appellant had disclosed all relevant particulars and goods were verified by department. Essential ingredient of mens rea is completely absent. In absence of misdeclaration and suppression and considering bona fide conduct of appellant, confiscation and penalties are not legally tenable. Confiscation, redemption fine and penalty are set aside.
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