Court’s decision
The Customs excise and service tax appellate tribunal allowed the appeal and set aside the impugned appellate order which had reclassified the imported goods and denied the benefit of preferential customs duty. It held that the classification of imported gold pendants must be determined strictly in accordance with the Customs Tariff, Chapter Notes, and Harmonised System of Nomenclature, and not on subjective assumptions regarding purity or market practices.
The Tribunal concluded that the goods were correctly classifiable as articles of jewellery and not as semi-manufactured gold. Consequently, the benefit of exemption under the ASEAN–India Free Trade Agreement notification was held to be available. The confiscation, demand of duty, and penalties imposed by the lower authorities were found to be unsustainable.
The Tribunal further held that import restrictions introduced by subsequent policy notifications could not be applied retrospectively. Since the import took place when the goods were freely importable and covered under the FTA, denial of exemption was legally impermissible.
Facts
The appellant imported a consignment of gold pendants of high purity from a country covered under the ASEAN–India Free Trade Agreement and classified the goods as articles of jewellery. The import documents, including the certificate of origin and Form-1 under the Rules of Origin, were duly submitted to claim preferential duty exemption.
Despite the documentation, customs authorities detained the goods and disputed the declared classification. The Department took the view that jewellery of such high purity was uncommon and therefore treated the goods as semi-manufactured gold rather than finished jewellery. On this basis, the benefit of exemption was denied and confiscation proceedings were initiated.
The appellant was compelled to approach constitutional courts during the course of investigation. Subsequently, adjudication orders were passed confirming reclassification, duty demand, confiscation, and penalties. The appellate authority upheld these findings, leading to the present appeal before the Tribunal.
Issues
Whether gold pendants of high purity are classifiable as articles of jewellery under the Customs Tariff.
Whether customs authorities can reclassify goods based on assumptions about market practice and purity levels.
Whether preferential customs duty exemption under the ASEAN–India FTA can be denied despite valid certificates of origin.
Whether import policy restrictions introduced later can be applied retrospectively to past imports.
Petitioner’s Arguments
The appellant contended that the classification of goods must be determined strictly in accordance with the tariff headings, chapter notes, and explanatory notes, and not on subjective notions of how jewellery is ordinarily manufactured. It was submitted that pendants are explicitly included within the definition of articles of jewellery under the relevant chapter notes.
It was further argued that the imported goods were complete, finished pendants capable of personal adornment and not semi-manufactured forms of gold. The appellant emphasized that even unfinished or incomplete jewellery would still fall within the jewellery heading as per the explanatory notes.
The appellant also submitted that the certificate of origin issued by the exporting country authorities was valid and binding for claiming preferential treatment, and that the denial of FTA benefits amounted to an impermissible non-tariff barrier.
Respondent’s Arguments
The Department argued that jewellery of extremely high purity was commercially improbable and therefore the goods were intended for melting or investment rather than adornment. On this assumption, it was contended that the goods were more appropriately classifiable as semi-manufactured gold.
The Revenue further relied on policy notifications issued by the Directorate General of Foreign Trade to argue that the goods were restricted for import. It was contended that the declaration of the goods as jewellery was a misclassification intended to wrongfully avail preferential duty benefits.
The Department also supported the confiscation and penalty imposed, asserting that the appellant had violated import policy conditions and customs law.
Analysis of the law
The Tribunal analysed the Customs Tariff in detail, particularly the distinction between headings relating to semi-manufactured gold and articles of jewellery. It reiterated that classification must be based on the statutory language of the tariff and relevant chapter notes, and not on external assumptions.
The Tribunal emphasised that Chapter Notes explicitly include pendants as articles of jewellery. It further observed that the tariff does not prescribe purity thresholds for jewellery classification. Therefore, purity alone cannot determine whether an article is jewellery or semi-manufactured gold.
On the issue of import policy, the Tribunal reaffirmed the settled principle that policy restrictions cannot be applied retrospectively. Any notification imposing restrictions after the date of import cannot invalidate a lawful import made earlier.
Precedent Analysis
The Tribunal relied on judicial precedents holding that classification disputes must be resolved strictly by tariff interpretation. Decisions clarifying the non-retrospective application of trade policy restrictions were also applied.
Precedents emphasising that free trade agreements cannot be nullified through indirect administrative measures were relied upon to reject the Department’s attempt to deny preferential treatment.
These precedents collectively supported the conclusion that the appellant’s classification and exemption claim were legally correct.
Court’s Reasoning
The Tribunal found that the lower authorities had travelled beyond the Customs Tariff and relied on assumptions unsupported by law or technical evidence. The mere belief that high-purity jewellery is uncommon could not override explicit tariff provisions.
It further held that the goods possessed physical characteristics of pendants and were capable of being worn, satisfying the definition of jewellery. The presence of a hook and ornamental design was decisive.
The Tribunal also rejected the retrospective application of policy restrictions and held that denial of FTA benefits in such circumstances undermines India’s international trade commitments.
Conclusion
The appeal was allowed, and the impugned order was set aside in entirety. The goods were held to be correctly classifiable as articles of jewellery and entitled to preferential duty exemption under the ASEAN–India FTA.
All consequential demands, confiscation, and penalties were quashed.
Implications
This ruling provides clarity on jewellery classification and limits arbitrary reclassification by customs authorities. It reinforces that purity-based assumptions cannot override tariff interpretation.
The decision strengthens the enforceability of free trade agreements and offers significant protection to importers against retrospective policy application and non-tariff barriers.
