Delhi High Court Writ: Custom Duty Demand Set Aside
Successfully challenged a ₹22 crore customs duty demand before the Delhi High Court by establishing classification errors and procedural violations in the assessment order — full demand set aside on merits.
Practice Areas Involved
The Challenge
A Delhi-based electronics importer received a show cause notice from Customs demanding ₹22 crore in additional customs duty, alleging misclassification of imported electronic components across three consecutive years. The Customs department contended that the components should have been assessed under a higher duty HSN heading. The demand also included substantial penalties for alleged misdeclaration. The importer's internal team had prepared a departmental reply that was largely procedural — it did not fully engage with the classification dispute on merits.
Our Approach
We filed a writ petition before the Delhi High Court challenging both the show cause notice and the consequent demand on two grounds. First, a substantive classification argument: we engaged a senior technical expert and a customs classification specialist to prepare a detailed note establishing the correct HSN heading for the components based on their material composition, functional characteristics, and applicable customs tariff explanatory notes. This technical analysis formed the core of the writ petition.
Second, a procedural violation argument: the Customs authority had failed to provide an opportunity for personal hearing before finalising the assessment — a mandatory requirement under Section 28 of the Customs Act. Additionally, the show cause notice relied on a circular that had been withdrawn by the CBIC 14 months before the notice was issued, rendering the legal basis for reclassification legally unsustainable.
The Result
The Delhi High Court set aside the demand in full on both grounds. The court held that reliance on a withdrawn circular was per se unsustainable, and additionally that the classification analysis in the assessment order was erroneous on merits. The full ₹22 crore demand was set aside. Penalties were dismissed. The court's order specifically noted the procedural violation as an independent basis for setting aside the demand, without requiring the court to decide the substantive classification question — though it did so as well in the interest of finality.
Key Lessons
- ◆Customs classification disputes must be fought on both technical and procedural grounds simultaneously — a purely procedural challenge that succeeds without a merits finding does not create finality.
- ◆A withdrawn circular cited in a show cause notice is a per se ground for challenge — always check the current validity of the legal instruments cited in any demand notice.
- ◆Early engagement of both customs classification experts and legal counsel — not just legal counsel — is essential in technical classification disputes.
- ◆The mandatory personal hearing requirement under Section 28 of the Customs Act is consistently overlooked by Customs authorities; procedural violation alone is a sustainable challenge in the Delhi High Court.
Facing a similar challenge?
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