• Dated 16^th April, 2026

SEZ to DTA Supplies not ‘Personal Imports’; IGST not Equivalent to Customs Duty: CESTAT

Brief Facts

The Assessee was engaged in the manufacture and sale of IT products such as desktops, laptops, and monitors from its SEZ unit, effected clearances to customers located in the Domestic Tariff Area (DTA). At the time of such clearances, the assessee classified the goods under their respective tariff headings (CTH 8471/8528) and discharged applicable IGST. Pursuant to audit, the Department alleged that such goods, being supplied to individual customers, were meant for personal use and therefore liable to be classified under CTH 9804 as "goods imported for personal use.". Based on this premise, a substantial demand of differential duty along with interest, penalty, and confiscation was confirmed by the Adjudicating Authority.

Assessee's Contention

The assessee contended that classification under CTH 8471/8528 is correct, as laptops, desktops, and monitors are specifically covered therein. Invocation of Heading 9804 is misplaced, since it applies only to dutiable goods imported for personal use, and both conditions are not satisfied.

The goods are not "dutiable," being subject to nil or exempt basic customs duty; IGST alone does not make them dutiable. Further, the imports were for commercial sale in the Domestic Tariff Area, not personal use. Classification must be determined at import and cannot depend on end use. Hence, the proposed reclassification and consequential demand and penalties are unsustainable.

Department's Contention

The Department contended that SEZ to DTA clearances are deemed imports and, since goods were supplied to individuals, they qualify as personal imports under Heading 9804. It was further argued that levy of IGST makes the goods 'dutiable' in nature on account of the levy of IGST at the time of clearance. Relying on the provisions of the Customs Act read with the Customs Tariff Act and IGST Act, it was argued that IGST forms part of the duty structure applicable on imported goods, and therefore the presence of such levy satisfies the condition of 'dutiable goods' under Heading 9804.

Court Held

The Tribunal held that classification under Heading 9804 requires goods to be dutiable, imported, and meant for personal use, all of which must be satisfied cumulatively. It was observed that IGST is not a duty levied under the Customs Act and therefore cannot render goods 'dutiable'. Further, goods attracting nil rate or exemption from customs duty cannot be treated as 'dutiable goods'. The Tribunal clarified that sale of goods by the assessee to customers in the ordinary course of business does not qualify as 'personal use', as contemplated under Heading 9804, which is primarily intended for baggage or personal importations. It was also held that classification cannot be based on end-use by customers and that the burden to justify reclassification lies on the Revenue, which was not discharged in the present case. Accordingly, the demand along with interest, penalty, and confiscation was held unsustainable, being beyond the scope of the SEZ law.

BTA Comment

This ruling is a key precedent in curbing aggressive reclassification of SEZ to DTA supplies under Heading 9804. The Tribunal has rightly emphasized that IGST cannot be equated with customs duty for determining 'dutiable goods', thereby limiting unwarranted tax exposure. It also clarifies that commercial sales to customers cannot be treated as personal imports, restricting the scope of Heading 9804 to genuine baggage/personal import cases.

Importantly, the decision reinforces that Revenue must discharge the burden in classification disputes and cannot rely on assumptions such as end-use or customization. Further, the ruling highlights statutory limitations under the SEZ framework, confirming that demand, interest, penalty, and confiscation cannot be invoked in absence of explicit legal provisions, thereby providing significant relief and certainty to SEZ units.

Case Reference

Dell International Services India Pvt. Ltd. vs Principal Commissioner of Customs, Chennai, Final Order No. 40372/2026 dated 17.03.2026 (2026) 40 Centax 225 (Tri.-Mad).

Author: Noor Jahan

Edited by: Sneha Nandi