Karnataka High Court
M/S Vaibhav International vs The Commissioner Of Customs on 9 March, 2026
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
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WP No. 33823 of 2024
C/W WP No. 17776 of 2025
WP No. 24075 of 2025
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF MARCH, 2026 R
BEFORE
THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 33823 OF 2024 (T-CUS)
C/W
WRIT PETITION NO. 17776 OF 2025 (T-CUS)
WRIT PETITION NO. 24075 OF 2025 (T-CUS)
IN WP No. 33823/2024
BETWEEN:
M/S VAIBHAV INTERNATIONAL
REPRESENTED BY SOLE PROPRIETOR
JITENDRA KUMAR CHAJER
AGED ABOUT 42 YEARS
S/O BIMAL KUMAR
NO.402, PID NO. 28-95-8/126,
2ND FLOOR NO.8, KEMPEGOWDA ROAD,
BHOOMIKA THEATRE, GANDHI NAGAR,
BENGALURU - 560 009
Digitally signed ...PETITIONER
by CHANDANA
BM
(BY SRI. KIRAN S. JAVALI AND SRI. V. RAGHURAMAN, SENIOR
Location: High
Court of COUNSELS FOR SRI. SHASHWATH S. PRAKASH, SRI. SAMIT
Karnataka PARVATIKAR, SRI. C.R. RAGHAVENDRA & SMT. SANJANA AHUJA,
ADVOCATES)
AND:
THE COMMISSIONER OF CUSTOMS
CITY CUSTOMS COMMISSIONERATE
CR BUILDING, QUEENS ROAD,
BANGALORE - 560 001
...RESPONDENT
(BY SRI. ARAVIND KAMATH, ASG FOR
SRI. UNNIKRISHNAN M., ADVOCATE)
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THIS W.P. IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ACTION OF
THE RESPONDENT IN SEIZING THE GOODS IMPORTED VIDE BILL
OF ENTRY NO.5470956 DATED 06.09.2024 AT ANNEXURE-D DATED
06.12.2024 AND ETC.,
IN WP NO. 17776/2025
BETWEEN:
M/S VAIBHAV INTERNATIONAL
GST-29AHZPC6908M1ZG
AN UNREGISTERED PROPRIETARY FIRM
REPRESENTED BY PROPRIETOR,
JITENDRA KUMAR CHAJER,
AGED ABOUT 42 YEARS,
S/O BIMAL KUMAR,
NO.402, PID NO. 28-95-8/126,
2ND FLOOR, NO.8, KEMPEGOWDA ROAD,
BHOOMIKA THEATRE, GANDHI NAGAR,
BENGALURU - 560 009
...PETITIONER
BY SRI. KIRAN S. JAVALI AND
SRI V. RAGHURAM, SENIOR COUNSELS APPEARING FOR,
SRI. SHASHWATH S. PRAKASH, SRI SAMIT PARVATIKAR,
SRI. C.R. RAGHAVENDRA &
SMT. SANJANA AHUJA, ADVOCATES)
AND:
1. THE COMMISSIONER OF CUSTOMS
CITY CUSTOMS COMMISSIONERATE,
C R BUILDING, QUEENS ROAD,
BENGALURU - 560 001
2. ASSISTANT COMMISSIONER OF CUSTOMS
OFFICE OF THE ADDITIONAL COMMISSIONER OF CUSTOMS,
INLAND CONTAINER DEPOT, WHITEFIELD,
BANGALORE - 560 066
...RESPONDENTS
(BY SRI. ARAVIND KAMATH, ASG FOR
SRI. UNNIKRISHNAN M., ADVOCATE)
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THIS W.P. IS FILED UNDER ARTICLE 226 OF CONSTITUTION
OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI OR ANY
OTHER WRIT, ORDER OR DIRECTION AND SET ASIDE THE
COMMUNICATION DATED 23.5.2025 (ANNEXURE-A) AND ETC.,
IN WP NO. 24075/2025
BETWEEN:
M/S VAIBHAV INTERNATIONAL
REPRESENTED BY PROPRIETOR
JITENDRA KUMAR CHAJER
AGED ABOUT 42 YEARS
S/O BIMAL KUMAR
NO. 402 PID NO. 28-95-8/126,
2ND FLOOR, NO.8, KEMPEGOWDA ROAD
BHOOMIKA THEATRE, GANDHIN NAGAR
BENGAURU - 560 009
...PETITIONER
(BY SRI. KIRAN S. JAVALI AND
SRI V. RAGHURAM, SENIOR COUNSELS APPEARING FOR,
SRI. SHASHWATH S. PRAKASH, SRI SAMIT PARVATIKAR,
SRI. C.R. RAGHAVENDRA &
SMT. SANJANA AHUJA, ADVOCATES)
AND:
THE COMMISSIONER OF CUSTOMS
CITY CUSTOMS COMMISSIONERATGE
C R BUILDING, QUEENS ROAD,
BANGLAORE - 560 001
(REP. BY SENIOR STANDING COUNSEL)
...RESPONDENT
(BY SRI. ARAVIND KAMATH, ASG FOR
SRI. UNNIKRISHNAN M., ADVOCATE)
THIS W.P. IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE SHOW
CAUSE NOTICE NO.674/2024-CUSTOMS-SIIB ISSUED THE
RESPONDENT IN F.NO BY CUS/SIIB/MISC/663/2024-ICD-
WHITEFIELD-BENGALURU DATED 17.12.2024 (ANNEXURE B) AS
HAVING BECOME INFRUCTUOUS AND ETC.,
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THESE PETITIONS ARE BEING HEARD AND RESERVED ON
10.12.2025 COMING ON FOR PRONOUNCEMENT OF ORDERS THIS
DAY, THE COURT MADE THE FOLLOWING:-
CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
CAV ORDER
In W.P.No.33823/2024, petitioner seeks for the following
reliefs:-
" (a) Issue a writ of certiorari or any other writ, order or
direction and set aside the action of the Respondent in
seizing the goods imported vide Bill of Entry No.5470956
dated: 06.09.2024 at ANNEXURE-D, dt: 06.12.2024.
(b) Issue a Writ of Mandamus or any other appropriate
writ order or direction Respondent to issue certificate of
waiver off demurrage, detention and ground rent charges.
(c) Pass such other order or direction as deemed fit
and proper by this Hon'ble Court in the facts and
circumstances of the case."
In W.P.No.17776/2025, petitioner seeks for the following
reliefs:
" (a) Issue a Writ of certiorari or any other writ, order or
direction and set aside the communication dated:
23.05.2025 (Annexure-"A");
(b) Issue a Writ of Mandamus or any other appropriate
Writ or order direction directing the release of the
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imported cargo in accordance with the Interim Orders of
this Hon'ble Court dated: 29.04.2025 (Annexure-"D").
(c) Pass such other order or direction as deemed fit
and proper by this Hon'ble Court in the facts and
circumstances of the case."
In W.P.No.24075/2025, petitioner seeks for the following
reliefs:-
" (a) Issue a Writ of certiorari or any other writ, order or
direction set aside the SHOW CAUSE NOTICE NO.
674/2024-CUSTOMS-SIIB issued by the respondent in
F.NO.CUS/SIIB/MISC/663/2024 ICD-Whitefield-
Bengaluru dated: 17.12.2024 (Annexure-"B") as having
become infructuous.
(b) Issue a Writ of Mandamus or any other appropriate
writ order or direction, directing the Respondent to
forebear from acting or hearing the SHOW CAUSE
NOTICE NO. 674/2024+CUSTOMS-SIIB issued by the
respondent in F.No.CUS-SIIB/MISC/663/2024-ICD-
Whitefiled-Bengaluru dated: 17.12.2024 (Annexure-"B");
(c) Pass such other order or direction as deemed fit
and proper by this Hon'ble Court in the facts and
circumstances of the case."
2. The brief facts giving rise to the present petitions are as
under:
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Petitioner contends that on 06.08.2024, Petitioner imported
28 MTs of Roasted Areca nuts from CV Neelam Pinang Jaya,
Indonesia vide Invoice bearing No.015-NPJ-AUG-2024 along with
the packing list issued by the said Neelam Pinang Jaya and that on
06.09.2024Petitioner filed Bill of Entry (BOE) No.5470956 for
clearance of 28 MTs Roasted Areca nuts from Indonesia valued at
Rs. 35,65,800/- under Tariff Entry - 20081920. In pursuance of the
same, on 11.09.2024, the Commissioner of Customs sent samples
of subject roasted areca nuts covering one container for testing to
the Central Revenues Control Laboratory(CRCL), New Delhi which
is a subordinate office under the control of Central Board of Excise
and Customs, Department of Revenue, Ministry of Finance. The
CRCL issued a test report dated 06.09.2024 to the Commissioner
of Customs for the aforesaid petitioner's BOE No.5470956 stating
that the sample provided is roasted areca nuts. Subsequently, on
08.10.2024, samples of areca nuts were again sent by
Commissioner of Customs for testing to M/s. ICAR-CPCRI, Kerala,
which issued a report dated 11.11.2024 stating that it cannot be
ascertained whether the sample provided have undergone roasting
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process and that the sample has similar characteristics to that of a
raw dried areca nut/betel nuts.
2.1 It is contended that 06.12.2024, a Seizure Memo was
issued by the respondents under Section 110 of Customs Act,
1962 (for short, the "Customs Act") for seizing 28MTs of Areca
Nuts of BOE 5470956 dated 06.09.2024 - based on 2nd test report
from ICAR dated 11.11.2024 while ignoring the earlier CRCL
Report dated 30.09.2024 and a Mahazar issued by the
respondents for seizure of the roasted areca nuts container
imported by the Petitioner vide BOE No. 5470956 dated
06.09.2024 on grounds of violation of foreign trade policy under
Foreign Trade (Development and Regulation) Act, 1992 (for short,
the "FTDR Act").
3. Aggrieved by the impugned action of the respondents in
seizure and detention of roasted areca nuts vide Seizure Memo
dated 06.12.2024 and for release of the said detained goods,
petitioner preferred the instant W.P.No.33823/2024 on 10.12.2024
seeking the aforesaid reliefs.
4. During the pendency of the aforesaid
W.P.No.33823/20204, the respondents issued the impugned Show
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Cause Notice dated 17.12.2024 (SCN) to the Petitioner raising a
re-determined demand of Rs.1,62,11,227/- against the roasted
areca nuts imported vide BOE No. 5470956 dated 06.09.2024. In
the impugned SCN, respondents rejected the classification of
Roasted Areca nuts under tariff entry 2008 1920 as well as the
valuation of imported goods based on MIP Rs.351 per kg. The
SCN also stated that the petitioner had imported prohibited goods
under Notification No.57/2015-20 dated 14.02.2023 which were
liable for confiscation under Section 111(d), (m) and (o) of the
Customs Act and raised a duty demand of Rs.1.78 crores under
Section 28(4) together with interest under Section 28AA and
penalty under Section 114A of the Customs Act.
5. The instant W.P.No.33823/2024 came up before the co-
ordinate bench of this Court on 27.01.2025 which passed an order
directing the respondents to forward the subject goods to the
CRCL, New Delhi and obtain a report, pursuant to which, the CRCL
submitted its 2nd Test report dated 31.01.2025 reiterating and re-
affirming its earlier 1st report and stating that the moisture content
was 5.9% and classified the goods as roasted areca nuts.
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6. It is contended that on 02.04.2025 the DGFT issued
Notification No.02/2025-26 making the import of areca nuts
including roasted areca nuts free, if imported by 100% Export
Oriented Units (EOU) and if the CIF value is above Rs. 351/- per
kg.
7. Thereafter on 29.04.2025, this Court passed an interim
order directing interim release of the subject goods in of the
Petitioner by imposing certain conditions. Aggrieved by the said
interim order dated 29.04.2025, the respondents preferred an
appeal in W.A.770/2025 on 15.05.2025 before the Hon'ble Division
Bench. On 23.05.2025, respondents issued the impugned
communication to the petitioner for provisional release of the goods
assessing the same provisionally under Ch 08028090 by applying
the value and duty applicable as on that date and called upon the
petitioner to pay the duty assessed provisionally and get the goods
released. Aggrieved by the impugned Communication dated
23.05.2025, petitioner preferred the instant W.P.No.17776/2025 on
19.06.2025 seeking quashing of the impugned communication and
for release of the subject goods in its favour.
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8. On 30.06.2025, the Hon'ble Division Bench passed an
order in W.A.No.770/20205 modifying the aforesaid interim order
dated 29.04.2024 passed in W.P.No.33823/2024 and thereby
holding that the Petitioner is entitled to provisional release of the
goods subject to the payment of 25% bank guarantee of value of
consignment imported by the petitioner. On 21.07.2025, the
respondents issued a letter of re-assessment of the subject goods
by classifying them under CTH 08028090 instead of CTH
20081920, subsequent to which, petitioner preferred the instant
W.P.No.24075/2025 on 13.08.2025 seeking quashing of the
impugned Show Cause Notice dated 17.12.2024 (SCN) and for
other reliefs.
9. In the case of Indu Shekar vs. Union of India -
W.P.No.5253/2025, the Hon'ble Division Bench of the Bombay
High Court passed an interim order dated 03.10.2025 staying the
operation of the aforesaid Notification No.02/2025-26 dated
02.04.2025 issued by the respondents. On 15.10.2025,
respondents issued a Notification 43/2025-26 classifying roasted
areca nuts under ITC (HS) Code 20081991 and prohibiting its
import if the CIF value is less than Rs. 351/- per Kg. Subsequently,
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on 07.11.2025, the Division Bench of this Court passed an order in
the aforesaid W.A.No.770/2025 clarifying its earlier order dated
30.06.2025, by stating that "value of the imported consignment" to
mean value determined by authorities under section 110A of
Customs Act for furnishing bank guarantee by the petitioner.
10. The respondents have filed their objections and have
contested the petition by disputing and denying the claim of the
petitioner and have sought for dismissal of the petitions.
11. Heard Sri.V.Raghuraman, learned Senior Counsel for
the petitioner and Sri.Arvind Kamath, learned Additional Solicitor
for the respondents and perused the material on record.
12. In addition to reiterating the various contentions urged in
the petitions and referring to the material on record, learned Senior
counsel submitted that the impugned SCN, Communication,
provisional assessment, seizure of subject goods by the
respondents etc., are illegal, arbitrary and contrary to facts and law
and the same deserve to be quashed and respondents are to be
directed to release the subject goods in favour of the petitioner. He
would elaborate his submissions and submit that roasted areca
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nuts (whole/cut/split) are specifically classifiable under CTH
20081920 and the attempt to classify it under CTH 08028090
would fall foul of the settled rule of construction that specific entry
would prevail over general entry and as per the lab reports,
moisture content of areca nuts are shown as below 10%, and
hence, the subject goods are classifiable as "roasted areca nuts"
under CTH 20081920.
12.1 Learned Senior counsel would submit that areca nuts
classifiable under Chapter 8 are subject to Import Policy restriction
wherein they are classified as 'Prohibited goods' in the Notification
No. 57/2015-2020 dated 14.02.2023 which states that for CTH
08028010, 08028020, 08028030 and 08028090 - Import Policy is
'Prohibited', but however, import is 'Free' if CIF value is Rs. 351/-
or above per Kg. In the subsequent Notification No. 02/2025-26
dated 02.04.2025 new conditions were imposed on CTH 08028090
as prohibited and import is free if CIF value is Rs. 351 and above
per Kg and this code also covers all kinds of processed Areca Nut
including Roasted Areca nut while CTH 20081920 is 'Free' but
however Roasted Areca nuts are not covered here as they are
specifically covered under CTH 08028090.
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12.2 Learned Senior Counsel would invite my attention to
the Notification No. 43/2025-26 dated 15.10.2025 in order to point
out that where CTH 08028090 continues to be prohibited, CTH
20081991 provided that 'Roasted Areca nut' falling under code
20081991 having CIF value less than Rs.351/- per kg is 'Prohibited'
which would effectively mean that the respondents had accepted
classification of Roasted areca nuts under Chapter 20. It was
submitted that the new Import Policy as per the DGFT Notifications
came into force only from 02.04.2025 and 15.10.2025, subsequent
to the petitioner importing the subject goods and submitting BOE
on 06.09.2024 and the same cannot be made applicable as the
BOE was deemed to have been presented in terms of Regulation
4(2) of Electronic Integrated Declaration and Paperless Processing
Regulations, 2018 and the rate and value in force stands
crystallized under Section 15(1) of Customs Act and that date was
06.09.2024 when BOE was presented by the petitioner and hence,
the subsequent Import Policy issued under Notifications dated
02.04.2025 and 15.10.2025 cannot be made applicable to the
subject goods.
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12.3 It was submitted that there was no dispute regarding
valuation of Roasted Areca Nuts imported under BOE dated
06.09.2024, since neither impugned Seizure Memo / Show Cause
Note allege undervaluation in terms of Section 14 of Customs Act
and therefore, the transaction value based on the invoice value
declared in the BOE is the value of imported consignment for
payment of customs duty and the DGFT restriction does not fix
value under the Customs Act but only prohibits consignments
below a particular value but does not fix the value which can be
done only under Section 14 of the Customs Act as is evident from
Section 3 of FTDRA, 1992, especially when none of the
proceedings have questioned the invoice value adopted by the
petitioner. He invited my attention to the judgment of the Apex
Court in the case of Century Metal Recycling Pvt. Ltd vs UOI
2019 - (367) ELT 3 (SC) to contend that the 'transaction value' or
invoice value cannot be rejected unless procedure under Rule 12
has been scrupulously followed and that in terms of Rule 12 of
Customs Valuation(Determination of valuation of imported goods)
Rules, 2007, the proper officer should have reasonable doubt as to
the transactional value on account of truth or accuracy of the value
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declared in relation to the imported goods and if and when the
doubt persists, the transaction value is to be determined
sequentially in terms of Rules 4 to 9after providing an opportunity
to the petitioner.
12.4 It was submitted that there is no dispute regarding
valuation of Roasted Areca Nuts imported under BOE dated
06.09.2024, since neither impugned Seizure Memo / Show Cause
Note allege undervaluation in terms of Section 14 of Customs Act
and therefore, the transaction value based on the invoice value
declared in the BOE is the value of imported consignment for
payment of customs duty.
12.5 It was further submitted that for the purpose of
clearance of imported goods, every importer is required to file, in
terms of the Section 46 of the Customs Act, a Bill of Entry for home
consumption or warehousing, as the case may be, in the form
prescribed under the relevant regulations electronically under
Regulation 4 of Bill of Entry (Electronic Integrated Declaration and
Paperless Processing) Regulations, 2018 and since Section 17
provides that an importer entering any imported goods under
Section 46 shall self assess the duty, the importer shall declare the
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correct classification, applicable rate of duty, value, benefit of
exemption notifications claimed, if any, etc. in respect of the
imported goods while presenting Bill of Entry.
12.6 It was submitted that while Section 17(2) - provides for
verification of declaration in BOE by the proper officer, Section
17(4) provides that on verification, examination or testing of goods
under self assessment, the proper officer may re-assess duty on
such goods under Section 17(5) and in case of re-assessment
under Section 17(4) being contrary to self assessment, the property
officer shall pass speaking order within 15 days from the date of re-
assessment of bill of entry. In this context, he would place reliance
upon the judgment of the Apex Court in the case of Commissioner
v. Canon India Pvt. Ltd. -- 2024 (390) E.L.T. 545 (S.C.) to
contend that that the proceedings under Section 28 are subsequent
to the completion of the process set out in Section 17 and the
procedure envisaged under Section 28 is in the nature of a quasi-
judicial proceeding with the issuance of the show cause notice by
the proper officer followed by adjudication of such notices by the
field customs officers and therefore, the nature of review under
Section 28 is significantly different from the nature of assessment
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and re-assessment under Section 17 and the ambit of Section 28
has also been restricted to the review of assessments and re-
assessments done under Section 17 for ascertaining if there has
been a short-levy, non-levy, part-payment, non-payment or
erroneous refund. It was therefore submitted that these provisions
have not been complied with by the respondents who have not
followed the prescribed procedure and the impugned proceedings,
SCN, etc., deserve to be quashed.
12.7 Learned Senior Counsel also submitted that the
impugned Communication dated 23.05.2025 which states that
goods imported under BOE dated 06.09.2024 has been
provisionally assessed by classifying goods under Chapter 8 by
applying value and duty to the said chapter heading as on that date
is illegal and arbitrary, inasmuch as the impugned Communication
dated 23.05.2025 which purports to do the 'provisional assessment'
neither refers to Section 18 of Customs Act nor is the provisional
assessment done in accordance with the procedure laid down in
Customs (Finalisation of Provisional Assessment) Regulations,
2025 or its predecessor regulations and the same deserves to be
quashed on this ground also. In support of his submissions,
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learned Senior counsel placed reliance upon the following
judgments:
i) Commissioner v. Shahnaz Commodities
International Pvt. Ltd. -- 2023(386) E.L.T. 214 (Mad.)
ii) Commissioner Vs. Universal Impex & Neena Impex
in W.A.Nos.3647 and 3648 of 2024
iii) Rawder Petroleum Pvt. Ltd. Vs UOI (2025) 32
Centax 169 (All.)
iv) Optimist Impex LLP Vs UOI R/Spl Civil Application
No. 1254/2025 dated 19.03.2025
v) Union of India v. G.S. Chatha Rice Mills -- 2020
(374) E.L.T. 289 (S.C.) -
vi) Union of India v. Cosmo Films Ltd. -- 2023 (72)
G.S.T.L. 417 (SC)
vii) Commissioner v. Bureau Veritas -- 2005 (181)
E.L.T. 3 (S.C.)
viii) Commissioner v. Prodelin India Pvt. Ltd. -- 2006
(202) E.L.T. 13 (S.C.)
ix) Union of India v. Mahindra and Mahindra Ltd. --
1995 (76) E.L.T. 481 (S.C.)
x) ITC Ltd. v. Commissioner -- 2019 (368) E.L.T. 216
(S.C.)
xi) Commissioner v. Canon India Pvt. Ltd. -- 2024
(390) E.L.T. 545 (S.C.)
xii) Century Metal Recycling P Ltd vs UOI 2019 (367)
ELT 3 (SC).
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13. Per contra, the learned ASG for the respondents would
reiterate the various contentions urged in the objections and submit
that the impugned communications/orders dated 23.05.2025 were
issued by the respondents to give effect to the orders passed by
this Court and that it was factually incorrect to state that final
assessment has been done and there was no requirement to hear
the petitioner before provisional assessment was ordered by the
respondents. It was submitted that the respondents had correctly
determined the issues of tariff classification and valuation as per
the DGFT Notification dated 02.04.2025 and the release of the
subject goods would necessarily have to be done accordingly in
terms of the orders passed by this Court. It was therefore submitted
that the impugned SCN, proceedings, communications etc., are
legal, correct and proper and that there was no merit in the
petitions and that the same are liable to be dismissed.
14. I have given my anxious consideration to the rival
submissions and perused the material on record.
15. The following points arise for consideration in the
present petitions:
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i) Whether the impugned provisional assessment is in accordance
with the provisions contained in the Customs Act, 1962 and the
Rules made there under?
ii) Whether the tariff classification adopted by the respondents in
relation to the subject goods is legal, valid and proper?
iii) Whether the valuation done by the respondents in relation to the
subject goods is in accordance with law?
iv) Whether the impugned show cause notice and all further
proceedings pursuant thereto including confiscation etc.,
warrant interference by this Court in the present petitions?
Re: Point No. (i);
16. A perusal of the undisputed material on record will
indicate that after the subject goods were imported, the bills of
entry were filed provisionally; in this context, it would be apposite to
note that the import took place on 06.09.2024 where the bills of
entry produced have been marked as "F" which means final but
subsequently on 23.05.2025, the bills of entry have been changed
to "P" by the Department meaning 'provisional', thereby indicating
that the first time that the Department modified the bill of entry was
on 23.05.2025. The seizure memo dated 06.12.2024 which states
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that the consignment was put on hold and sent for testing also
states that on 11.9.2024, samples were sent to CRCL, New Delhi
and the test reports were received on 30.09.2024, subsequent to
which the sample was re-sent to ICAR, Kasargod on 08.10.2024 by
the respondents and the test report was received on 11.11.2024. It
is a matter of record that all these aspects were noticed by this
Court in its interim order dated 29.04.2025 passed in
W.P.No.33823/2024 as hereunder:
" The petitioners in all the petitions seek quashing / setting
aside of the action of the respondents in seizing / detaining
the subject goods viz., Arecanut imported by them from
Indonesia and for other reliefs. By way of interim prayer,
petitioners seek direction to the respondent to release the
subject goods imported by them and for other reliefs.
2. Since common questions of law and fact arise for
consideration in these petition, they are taken up together for
consideration.
3. Briefly stated, the petitioners contend that they are
proprietary concerns / partnership firms carrying on business
in importing and trading of roasted Arecanuts having
obtained the Importer / Exporter Code from the DGFT and
having got registered for payment of GST under the CGST /
KGST Act, 2017. It is contended that the petitioners import
roasted Arecanuts, which are not prohibited and permitted by
the respondents and in respect of which, customs duty
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payable is 'Nil' in view of the provisions of the Customs Act,
1962 and the Notifications, Circulars etc., issued by the
respondents. It is further contended that the petitioners
imported their respective subject roasted Arecanuts during
August - September, 2024, samples of which were sent by
the respondents to the Central Revenue Control Laboratory,
New Delhi (CRCL), who issued / submitted reports during
September, 2024 stating that the petitioners had imported
roasted Arecanuts which were not raw Arecanuts, on which,
customs duty was payable by the petitioners. Subsequently,
respondents sent samples of the Arecanuts to Indian Council
for Agricultural Research - Central Plantation Crops
Research Institute (ICAR-CPCRI), Kasargod, Kerala, who
submitted reports during October - November, 2024, to the
effect that the subject goods were raw and dried Arecanuts
and not roasted Arecanuts as contended by the petitioners. It
is the grievance of the petitioners that subsequent to
receiving the reports from ICAR - CPCRI, the respondents
seized the subject goods during December, 2024 vide the
impugned seizure and as such, the petitioners are before
this Court by way of the present petitions putting forth
various contentions along with documents.
4. The respondents have contested the petitions as well as
the interim prayer by filing their statement of objections and
documents specifically contending that the subject goods
were raw Arecanuts and not roasted Arecanuts as claimed
by the petitioners and that their claim was liable to be
rejected. It is contended that since there were various
discrepancies and ambiguities in the CRCL reports,
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Arecanuts were once again sent to the ICAR-CPCRI, which
submitted reports stating that the Arecanuts were raw / dried
Arecanuts and not roasted Arecanuts and in the light of the
said reports by the ICAR-CPCRI, the respondents detained
and seized the subject goods and have issued show cause
notices to the petitioners and the said proceedings are
pending adjudication. It is therefore contended that the
petitioners are not entitled to any relief in the present
petitions which are liable to be dismissed.
5. Heard learned Senior counsel for the petitioners and
learned ASG for the respondents and perused the material
on record.
6. Learned Senior counsel for the petitioners would reiterate
the various contentions urged in the pleadings and
documents and contend that in the light of the reports
submitted by the CRCL prior to the petitions and during the
pendency of the present petitions, pursuant to interim orders
passed by this Court, the subject goods were roasted
Arecanuts and not raw / dried Arecanuts and since the
reports of the ICAR - CPCRI were not conclusive apart from
the fact that the said organization was not a duly accredited
laboratory, respondents were not entitled to detain / seize
the Arecanuts which were to be released in favour of the
petitioners. In support of his submissions, learned Senior
counsel placed reliance upon the following judgments:-
(i) The Commissioner of Customs vs. M/s.Shahnaz
Commodities International Pvt. Ltd., - CMA No.600/2023 &
connected matters Dated 01.08.2023;
(ii) M/s.Optimist Impex LLP vs. Union of India & others -
R/Spl.Civil Application No.1254/2025 Dated 19.03.2025.
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(iii) The Commissioner of Customs vs. Laltanpuii
Cus.Application No.1/2021 Dated 28.10.2021 confirmed in
SLP Diary No.27003/2022 Dated 28.10.2021.
(iv) Ayesha Exports vs. Union of India & others - 2019
SCC OnLine PAT 3405;
(v) Commissioner of Customs vs. M/s.Neena Enterprises -
W.A.No.3647/2024 & connected matters Dated 04.03.2025.
(vi) M/s.Universal Intex vs. Commissioner of Customs -
W.P.No.23836/2024 & connected matters dated 22.11.2024.
(vii) M/s.Prenda Creations Pvt. Ltd., vs. Union of India -
CWP - 28682/2024 Dated 09.04.2025;
(viii) Commissioner of Income Tax vs. Smt.Godavari Devi
Saraf - 1977 SCC OnLine Bombay 215;
7. Per contra, learned ASG for the respondents would
reiterate the various contentions urged in the statement of
objections and submit that neither the Food, Safety and
Standards Act, 2006 nor the FSS (Recognition and
Notification of Laboratories) Regulations, 2018, or the FSS
(Food Products Standards and Food Additives) - 2016 and
2017 are applicable to the Arecanuts, which were detained
and seized under the CBIC Circular No.46/2020- Customs
dated 15.10.2020, which permit testing of goods of outside
samples by laboratories other than Revenue Laboratories
and as such, the respondents were fully justified in sending
the samples to ICAR - CPCRI which has issued reports to
the effect that Arecanuts imported by the petitioners are not
roasted Arecanuts and the respondents correctly detained
and seized the subject goods by the impugned seizure which
does not warrant interference by this Court in the present
petitions, which are liable to be dismissed.
8. I have given my anxious consideration to the rival
submissions and perused the material on record.
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9. A perusal of the material on record will indicate that both
sides have urged various factual and legal contentions in
support of their respective claims regarding the subject
goods being roasted Arecanuts as claimed by the petitioners
or raw / dried Arecanuts as claimed by the respondents; so
also, there are disputes between the parties in relation to the
applicability of the FSS Act and Regulations vis-a-viz the
Customs Act to the subject Arecanuts as well as the
applicability and relevance of the Notifications, Circulars etc.,
relied upon by both sides, which would necessarily have a
direct / substantial bearing / impact on the very detention /
seizure which would necessarily have to be decided at the
time of final disposal of the petitions; it is however an
undisputed fact and the matter of record that immediately
upon import of the subject Arecanuts by the petitioners along
with Bills of Entry, the respondents on their own / suo moto
thought it fit and appropriate to send the samples to the
CRCL, Delhi; in this context, it is relevant to state that on
30.07.2024, the Government of India, Ministry of Finance,
Department of Revenue / CBIC issued / addressed a
communication to the Customs Authorities across India
specifically stating that the CRCL has complete facility to test
all samples described as "Arecanuts/Betelnuts" either in the
form of splits, whole, broken or powder including answering
the query as to whether they are raw or dried or roasted etc.,
and that the CRCL has complete facility to test these
samples and reports are issued based on FSSAI
Regulations and BIS Specifications. The said communication
also states that since there were no facilities for testing
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microbiological parameters at present in other revenue
laboratories, it was decided by the competent authority to
direct all samples pertaining to "Arecanuts/Betelnuts" in any
form to CRCL for testing until further orders. The said
communication reads as under:-
F.No.:14-Adm/2023-24/Pt.I
Date: 30.07.2024
To
Date: 30.07.20124
The Pr. Commissioner/Commissioner of Customs,
Chennai/Cochin/Goa/Kandia/Kolkata/Mangalore/Delhi,
Mumbai/Tuticorin/Nhava Sheva/Vadodara & Vizag
Subject: Test of Areca Nut/ Betel Nut (raw/dried/roasted/powder)
Reg.
Madam/Sir,
CRCL, New Delhi has been receiving samples described
as Areca nut/Betel nut either in the form of splits, whole, broken
or powder, for testing. The queries that are required to be
answered includes mainly whether raw or dried or roasted,
scented or not fit for human consumption, moisture content, are
coline content, additive present or no etc. CRCL has the
complete facility to test these samples and reports are issued
based c the FSSAI regulation and BIS specification,
2. As there are no facilities for testing microbiological
parameters at present in on revenue laboratories, it has been
decided by the competent authority to direct all laboratory In-
charges to henceforth forward any sample pertaining to "Areca
nut/nut" in any form to CRCL, New Delhi for testing until further
orders.
3. This issues with the approval of Director (RLs).
Yours faithfully,
(V.Suresh)
Joint Director(NFSG)
10. A perusal of the aforesaid communication will prima
facie indicate that it is the CRCL which is the competent /
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designated laboratory to test "Arecanuts/Betelnuts" in any
form and submit a report including whether they are raw,
dried, roasted etc., and the contention of the respondents
that the said reports of the CRCL cannot be considered or
looked into cannot be accepted, especially in the light of the
aforesaid communication issued by the respondents
themselves.
11. Learned ASG has contended that the said
communication merely states that all samples are to be
forwarded to the CRCL only because of lack of facilities for
testing microbiological parameters in other laboratories and
there was no bar for the respondents to send the samples to
ICAR, which has issued a report against the petitioners and
correctly accepted by the respondents; in this regard, the
said issue regarding interpretation / construction of the said
communication in the light of the statutory provisions would
have to be dealt with at the time of final disposal of the
petitions; at this stage, suffice it to state that so long as the
respondents themselves had not only specifically stated that
the CRCL had complete testing facilities coupled with the
undisputed fact that the respondents themselves elected /
chose to send the samples to the CRCL without any request
made by the petitioners is sufficient to come to the
conclusion that the respondents are estopped from now /
subsequently contending that no reliance can be placed on
the said CRCL reports for the purpose of ascertaining prima
facie as to whether the subject goods were roasted
Arecanuts as contended by the petitioners or raw / dried
Arecanuts as contented by the respondents and
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consequently, the said contention of the respondents is
clearly barred by the principles of acquiescence and
estoppel and the same cannot be accepted.
12. A perusal of the material on record will also indicate that
this Court heard both sides and passed the following order
on 27.01.2025 as hereunder:-
" In these writ petitions, the petitioners are before this Court
with a prayer to quash the seizure of Bill of Entry
No.5470956 dated 06.09.2024 in W.P.No.33823/2024; Bill of
Entry No.5040352 dated 13.08.2024 and Bill of Entry
No.5164270 dated 21.08.2024 in W.P.No.33844/2024; and
Bill of Entry No.5739104 dated 21.09.2024 in
W.P.No.33855/2024 in respect of imported areca nuts and
for a direction to the respondent to release the detained
goods imported under Bill of Entry No.5867184 dated
29.09.2024 in W.P.No.33844/2024; and Bills of Entry
Nos.5195460 dated 22.08.2024, 5743140 dated 22.09.2024,
5763310 dated 24.09.2024, 5866956 dated 29.09.2024 and
5887000 dated 29.09.2024 in W.P.No.33855/2024.
The only question that would arise is as to whether
the imported areca nuts are roasted one or raw areca nuts
for the purpose of assessing the duty. The report on which
respondent places reliance is disputed by the petitioners.
Learned counsel for respondent submits that
respondent has no objection to obtain report from any
accredited Laboratory by sending the samples of areca nuts
imported by petitioners.
In the facts and circumstances existing in the
present case, I deem it appropriate to direct the respondent
to get the areca nuts in question tested from the accredited
laboratory indicated in the respondent's statement of
objections i.e., the documents produced by respondent -
Annexure to Notification No.17/2023 dated 03.07.2023 of the
Ministry of Commerce & Industry, Department of Commerce,
Directorate General of Foreign Trade. i.e., Central Revenues
Control Laboratory, Hillside Road, Pusa, New Delhi-110012.
The respondent shall seek report on the following as
indicated in the Annexure to the above Notification:
i. Physical description of the sample: please
comment on the size, shape, colour, nature and
composition?
ii. Whether these are de-husked or not?
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iii. Whether these are roasted areca nuts or not?
iv. Whether these are sundried/moderately heated
areca nuts?
v. Whether the samples presented are raw areca or
betel nuts (fresh or dried)? If not, what is the process that
these nuts have undergone?
vi. What are the percentage of arecoline and tannin?
vii. Does the sample present a different appearance
or consistency from raw dried areca or betel nuts?
viii. Does the sample retain the essential
characteristics of raw, dried Areca nuts
ix. Please comment on the difference between raw
dried areca or betel nuts and the sample presented.
x. Does the sample contain any flavouring materials
or additives or preservatives? If yes, please mention the
nature and composition of the same.
xi. What is the percentage of ash content?
xii. What is the percentage of water content,
Xiii. Please confirm presence of lime, katha
(catechu) and tobacco, if any.
The respondent shall make arrangement to forward
the samples of areca nuts imported by the petitioners
covered under Bill of Entry No.5470956 dated 06.09.2024 in
W.P.No.33823/2024; Bill of Entry No.5040352 dated
13.08.2024, 5164270 dated 21.08.2024 and 5867184 dated
29.09.2024 in W.P.No.33844/2024; and Bill of Entry
No.5739104 dated 21.09.2024, Bills of Entry Nos.5195460
dated 22.08.2024, 5743140 dated 22.09.2024, 5763310
dated 24.09.2024, 5866956 dated 29.09.2024 and 5887000
dated 29.09.2024 in W.P.No.33855/2024 forthwith to the
Central Revenues Control Laboratory, Hillside Road, Pusa,
New Delhi-110012 to examine whether imported areca nuts
are roasted or raw areca nuts and get the report within
10.02.2025.
List on 11.02.2025.
13. A perusal of the aforesaid orders will indicate that this
Court has recorded the specific contention of the
respondents that the following are accredited laboratories
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where testing can be done in relation to the petitioners
herein;
a. ICAR - CPCRI, Kasargod;
b. CRCL, New Delhi;
c. CRCL, Mangalore;
d. CRCL, Chennai;
14. After hearing both sides and with the express consent of
the respondents who have stated that they had no objection
to obtain a report from any of the aforesaid accredited
laboratories by sending samples of Arecanuts imported by
the petitioners, this Court sent it to the CRCL, New Delhi,
which has issued / submitted reports to this Court in the
present petitions, specifically stating that the subject goods
are roasted Arecanuts, thereby reiterating its earlier reports
issued prior to the present petitions being filed wherein they
had stated that the subject goods are roasted Arecanuts.
15. The aforesaid facts and circumstances prima facie
indicate that in view of the fact that even according to the
respondents who had themselves accepted not only that
CRCL, New Delhi was a duly accredited laboratory but had
also stated that they had no objection for the samples to be
sent to CRCL, New Delhi and both the reports indicating that
the subject goods are roasted Arecanuts and not raw / dried
Arecanuts is yet another circumstance to come to the
unmistakable conclusion that prima facie the reports of the
CRCL, New Delhi deserves to be accepted and the
contention of the respondents in this regard is liable to be
rejected.
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16. The respondents placed reliance upon CBIC Circular
No.46/2020- Customs dated 15.10.2020, which reads as
under:
Circular No.46/2020-Customs
F.No: 21019/08/2020-Cus(AS)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes & Customs
***
North Block, New Delhi
Dated 15th October, 2020
To,
All Pr. Chief Commissioners/Chief Commissioners of Customs,
All Pr. Chief Commissioners/Chief Commissioners of Customs
(P),
All Pr. Chief Commissioners/Chief Commissioners of CGST,
All Pr. Commissioners/Commissioners of Customs/Customs
(Preventive),
All Pr. Commissioners/Commissioners of CGST,
The Director, Central Revenues Control Laboratory, New
Delhi, Web Master CBIC.
Subject: Testing of outside samples by Revenue
Laboratories-reg.
Madam/Sir,
Central Revenues Control Laboratories (CRCL), assist the field
formations in chemical analysis of samples of various trade commodities
to enable appropriate assessment of duties. These laboratories also
assist in enforcement of Customs Act, NDPS Act, GST Laws, Central
Excise Act and other allied Acts including for the purpose of environment
protection, food safety etc.
2. The Revenue Laboratories have been extensively modernized
over past 03 years with the induction of state-of-the-art equipment and
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improvement of physical infrastructure. New man-power has also been
inducted at the cutting-edge levels in Group 'A', Group 'B' and Group 'C'.
Eight (08) of these laboratories have obtained NABL Accreditation, as
per ISO/IEC 17025:2017, for defined scope from March, 2019 onwards.
The CRCL, New Delhi; Custom House Laboratory, Mumbai; JNCH
Laboratory, Nhava Sheva; Custom House Laboratory, Chennai; Custom
House Laboratory, Cochin; Custom House Laboratory, Visakhapatnam;
Custom House Laboratory, Kandla and C.Ex & Customs Laboratory,
Vadodara are having NABL accreditation.
3. CRCL laboratories are now equipped to test samples which are
hitherto forwarded to Food Safety and Standards Authority of India
(FSSAI), Central Drug Standard and Control Organization (CDSCO) and
Textile Committee in order to improve proficiency, ensure optimum
utilization of equipment and other resources. Therefore, here is now an
opportunity for Revenue laboratories for optimum utilization of the
upgraded facilities, especially with state-of-the art instruments and to
cater to the needs of these agencies with respect to the samples drawn
at the customs area. Using CRCL by these agencies will not only help in
optimal use of the available equipment but also reduce the dwell time.
4. Accordingly, the Board prescribes the following guidelines:
(i) As Revenue Laboratories can deal with the samples related to
Drug Controller, FSSAI & Textile Committee, all the customs samples,
are preferably be tested in the Revenue Laboratories only.
(ii) In case facility to test particular commodity or parameter is
not available in the nearest Revenue Laboratory, such cases shall be
referred to the nearest government laboratory where such facility is
available.
(iii) CRCL, New Delhi shall also function as Referral Laboratory
along with other referral laboratories in Pharma, Textile & Food.
(iv) Whenever CRCL laboratories are not in a position to carry
out a test, they shall make use of nearest CDSCO/FSSAI approved
laboratories/Textile Committee.
5. Keeping in view the above position, the relevant Custom
House Laboratories are mapped with different Ports as per Annexure-A.
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Facilities available at CRCL, New Delhi as Referral Laboratory in Food
testing are listed at Annexure-B.
6. Further, Revenue Laboratories are not equipped to test
samples related to Animal Quarantine (AQCS), Plant Quarantine (PQCS)
and Wild Life Crime Control Bureau (WCCB). Hence, the existing
arrangements could continue in this regard.
7. The field formations under your jurisdiction may be sensitized
suitably.
8. Any difficulty in implementing this circular may kindly be
brought to the notice of the Board.
Encl: As above.
(Sharad Srivastsava)
Director (Anti-Smuggling Unit),
CBIC, New Delhi
17. Respondents contend that as per the aforesaid
circular, it is permissible to get the samples tested at
laboratories other than CRCL; the said contention cannot be
accepted in the facts and circumstances of the instant cases
inasmuch as paragraph-4(iv) of the said Circular clearly
indicates that it is only when CRCL Laboratories are not in a
position to carryout test, the respondents would be entitled to
make use of other laboratories; in the case on hand, the
respondents themselves had not only obtained the first test
report from the CRCL but had also stated that they had no
objection to send the samples to CRCL once again and in
the absence of any contention urged by the respondents that
the CRCL was not in a position to test the subject Arecanuts,
it cannot be said that the respondents were justified in
referring the samples for a test by the ICAR - CPCRI and on
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this score also, the contention of the respondents cannot be
accepted.
18. The material on record also indicates that after receiving
the test reports from the CRCL during September, 2024, the
respondents unilaterally and without assigning any reasons
whatsoever chose to send the samples to the ICAR - CPCRI
for testing once again; in this context, it is pertinent to note
that in the absence of any material to establish any reason,
much less, valid or sufficient reasons / sufficient grounds on
the part of the respondents to send the samples to ICAR -
CPCRI for testing after receiving the reports from the CRCL
without there being any material to doubt the veracity /
correctness of the CRCL reports, I am of the view that prima
facie, the respondents were not justified in sending the
samples to ICAR - CPCRI, much less, obtain a report from
them and make the said reports the basis to seize / detain
the subject Arecanuts and consequently, the said detention /
seizure is vitiated on this ground also.
19. Insofar as the application filed by the respondents to
reject the second CRCL report submitted to this Court
pursuant to the interim order dated 27.01.2025 is concerned,
in the backdrop of the aforesaid facts and circumstances,
coupled with the specific stance of the respondents in
suggesting the names of 4 Laboratories including 3 CRCL
Laboratories and ICAR - CPCRI out of which, the
respondents themselves had agreed, accepted and given
consent for the samples to be referred to CRCL, New Delhi,
which had reiterated its earlier reports by stating that the
subject goods were roasted Arecanuts, the respondents are
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estopped from seeking rejection of the said reports by filing
the present application which is devoid of merit and is liable
to be rejected.
20. In view of the aforesaid facts and circumstances, I am of
the considered opinion that prima facie, the seizure /
detention of the subject goods by the respondents is illegal
and contrary to law and facts and the relevant statutory
provisions and the subject Arecanuts deserve to be released
in favour of the petitioners pending disposal of the petitions
subject to certain terms and conditions.
21. The respondents are directed to release the subject
goods viz., Bill of Entry No.5470956 dated 06.09.2024 in
W.P.No.33823/2024; Bill of Entry No.5040352 dated
13.08.2024 and Bill of Entry No.5164270 dated 21.08.2024
in W.P.No.33844/2024; and Bill of Entry No.5739104 dated
21.09.2024 in W.P.No.33855/2024 in respect of imported
areca nuts and for a direction to the respondent to release
the detained goods imported under Bill of Entry No.5867184
dated 29.09.2024 in W.P.No.33844/2024; and Bills of Entry
Nos.5195460 dated 22.08.2024, 5743140 dated 22.09.2024,
5763310 dated 24.09.2024, 5866956 dated 29.09.2024 and
5867000 dated 29.09.2024 in W.P.No.33855/2024, in favour
of the petitioners within a period of 15 days from today,
pending disposal of the petitions, subject to the following
conditions:-
(i) Petitioners shall execute Provisional Duty Bond in favour
of the respondents prior to obtaining release of the subject
goods viz., Arecanuts;
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(ii) Petitioners shall submit statement of accounts of all the
sale proceeds etc., arising from the sale, disposal etc., of the
subject goods or any portion thereof which have been
directed to be released in favour of the petitioners under this
order.
(iii) Respondents are directed to issue Demurrage, detention
and wharfage waiver certificate in accordance with
applicable Customs Regulations in favour of the petitioners.
(iv) Petitioners shall after release of the imported
consignment is directed to file a compliance memo of having
complied with all the above conditions."
16.1 The aforesaid interim order passed by this Court was
modified only to the limited/restricted extent of modifying the terms
and conditions imposed by this Court for obtaining release of the
subject goods by the Hon'ble Division Bench in W.A.No.770/2025
dated 30.06.2025 as hereunder:
" The above three writ appeals are by Commissioner of
Customs/respondents before the Writ Court, questioning the
interim order dated 29.04.2025 passed by the learned Single
Judge directing release of imported consignment i.e., imported
roasted Areca Nuts.
2. Heard learned Additional Solicitor General of India
Sri.K.Aravind Kamath along with learned Central Government
Counsel Sri.M.Unnikrishnan for appellants/Custom Authorities
and learned senior counsel Sri.Kiran S. Javali for
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Sri.Shashwath S. Prakash, learned counsel for
respondents/petitioners. Perused the entire writ appeal
papers.
3. Learned Additional Solicitor General of India
Sri.K.Aravind Kamath would submit that learned Single Judge
could not have directed release of imported consignment i.e.,
Areca Nuts without any condition or security as required under
Section 110A of the Customs Act, 1962 (for short, '1962 Act').
He would submit that the Custom Authorities dispute the case
of the petitioners that it is roasted Areca Nuts. Learned
Additional Solicitor General of India would further submits that
to determine the tariff, the goods imported would fall under
Chapter-VIII and not under Chapter-XX as contended by the
petitioners. Further, he submits that the Areca Nuts are being
imported by making misclassifications. Further, he submits
that the respondents i.e., the petitioners before the Writ Court
on release of the goods, may disappear and it would be
difficult for the custom authorities to recover the duty and
penalty. Therefore, learned Additional Solicitor General of
India would submit that for release of the consignment,
petitioners shall be put on certain conditions or furnish bank
guarantee to the value of the consignment. He submits that
the duty assessed in all the three petitions is around Rs.86
Crores. Thus, he prays for allowing the writ appeals.
4. Per contra, learned senior counsel Sri.Kiran S. Javali
for respondents would submit that the imported consignment
is roasted Areca Nuts and it would fall under Chapter-XX of
the Custom Tariff and it is further submitted that the duty is Nil.
Therefore, the question of putting the petitioners on terms to
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deposit certain value would not arise. It is further submitted
that the consignment i.e., roasted Areca Nuts' duty would be
'zero' in terms of Chapter-XX of the Customs Tariff. Therefore,
learned senior counsel would submit that the learned
Single Judge was justified in directing release of imported
consignment without any condition or deposit. Thus, he prays
for dismissal of the appeals.
5. Having heard the learned counsel appearing for the
parties and on perusal of the writ appeal papers, we are of the
view that in terms of Section 110A, the
petitioners/respondents herein could seek for provisional
release of goods on furnishing a bond in the proper form with
such security and conditions as Adjudicating Authority may
require. As submitted by learned Additional Solicitor General
of India, the proceedings before the Adjudicating Authority are
pending. In view of the specific provision, learned Single
Judge, could not have directed release of imported
consignment without any security. The contention of both the
learned Additional Solicitor General of India as well as learned
senior counsel, whether the imported consignment would fall
under Chapter-VIII or Chapter-XX is yet to be decided. For
release of imported consignment apart from obtaining bond, it
would also require security.
6. In the above circumstances, the following:
ORDER
a) The petitioners i.e., respondents herein would
be entitled for provisional release of the
imported consignment, as directed by the
learned Single Judge, subject to giving
security of bank guarantee or any other
security to the tune of 25% of the value of the
imported consignment, in terms of Section
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110A of 1962 Act. To that extent, the interim
order dated 29.04.2025 is modified.
b) We request the learned Single Judge to
dispose of the writ petition as expeditiously as
possible.
c) Accordingly writ appeals stand disposed of.
d) In view of disposal of the appeals, all the
pending I.As would not survive for
consideration.”
16.2 For the sake of convenience and better understanding
of the procedure for assessment, it would be appropriate to
reproduce the flowchart submitted by the petitioner as hereunder:
Flowchart of Procedure for Clearance of Imported Goods under
CustomsGoods imported
Bill of Entry filed by the Petitioner u/s 46 of Customs
Act, 1962 on 06.09.2024Self-assessment of duty leviable on the goods by the
importer u/s 17(1)In terms of section 17(2), the proper officer is
required to verify the entries made by the importer
u/s 46 along with the self-assessment u/s 17(1)If on verification, it is found that Re-assessment to be done by the
the self-assessment is done proper officer u/s 17(4) if self-
correctly, the same will be assessment is found to be not accepted. done correctly. Out of Charge order u/s 47 is In terms of section 17(5), if the re- issued and goods can be assessment done by the proper cleared officer is contrary to the self- assessment done by the importer - 40 - NC: 2026:KHC:15737 WP No. 33823 of 2024 C/W WP No. 17776 of 2025 WP No. 24075 of 2025 HC-KAR Accepted by importer Not accepted by Importer Re-assessed duty to be paid and The proper officer shall pass a speaking order goods will be released within 15 days of re-assessment
Section 18: Provisional Assessment of duty
In terms of section 18(1), the proper officer may assess the duty leviable on such goods provisionally if the importer
furnishes security as the proper officer deems fit in the following cases:
a) Where the importer is unable to make self-assessment u/s 17(1) and makes a request in writing to proper officer for
assessment; or
b) Where the proper officer deems it necessary to subject any imported goods to any chemical or other test;
or
c) Where importer has produced all necessary documents and furnished full information but proper officer deems it
necessary to make further enquiry; or
d) Where necessary documents have not been produced or information has not been furnished and the proper officer
deems it necessary to make further enquiry
Section 18(1B), required the proper officer to finalise the provisional duty within
2 years from date of assessment u/s 18(1). This applies only to imports after
29.3.2025 and to pending provisional assessments.
In terms of Section 18(1C), if the proper officer is not able to finalize provisional
assessment u/s 18(1B), reasons for such non-finalization are to be informed to
the importer, and time limit specified u/s 18(1B) shall apply from the date of such
reasons.
In terms of section 18(1A), the importer shall submit the required document or
information to the proper officer for finalising the provisional assessment order
Section 18(2) requires the importer to pay duty along with interest in terms of section
18(3), after finalisation of the provisional assessment order by the proper officer, in
cases of goods cleared for home consumption and in cases of warehoused goods.
Section 18(4), being subject to the provisions u/s 18(5), provides for amount u/s
18(2)(a) to be refunded within a period of 3 months from date of assessment,
otherwise be subjected to levy of interest.
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Section 18(5) provides for refund of duty amount to the importer in the following
cases:
a) Duty and interest paid by the importer on such duty, where he has not passed on
the incidence of such duty and interest to any other person;
b) Duty and interest on imports paid by an individual for his personal use;
c) Duty and interest paid by the buyer, where the incidence of such duty is not
passes to any other person;
d) Export duty u/s 26;
e) Duty drawback payable u/s 74 and 75
Section 28: Recoveries of duties not levied or not paid or short levied or
short paid or erroneously refundedIn terms of section 28(1), the proper is to issue a show cause
notice within 2 years from the relevant date if any duty has not
been levied, or not paid or has been short-levied or short paid or
erroneously refunded due to reason other than collusion, or wilful
misstatement or suppression of facts.
In terms of section 28(4), the proper is to issue a show cause
notice within 5 years from the relevant date if any duty has not
been levied, or not paid or has been short-levied or short paid or
erroneously refunded by way of collusion, or wilful misstatement or
suppression of facts.
In terms of section 28(5), the person may pay the duty in full or in
part along with the interest u/s 28AA and penalty equivalent to 15%
of the duty within 30 days from the date of receipt of notice.
16.3 From a perusal of the above, it is clear that the
department has not followed any of the procedures contemplated in
Section 17 at all; assuming that the entire assessment is
provisional, in terms of Section 18 of the Customs Act, 1962, it was
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incumbent upon the respondents to have indicated that the
assessment are provisional but they have failed to do so; while the
imports took place on 06.09.2024, even according to the
respondents themselves, they marked the bill of entry as
provisional only on 23.05.2025; it would be relevant to note that
assuming that provisional assessments were adopted because of
subjecting the goods to test under Section 18(1)(b), Section 18(1A)
prescribes that if any document is needed from the importer, he
shall submit the said documents within the time frame specified; it
is clear that this provision does not apply as the respondents had
not asked the petitioners for any documents at this stage.
16.3 It would be relevant to note that the relevant rules
which were applicable on the date of import were Customs
(Finalisation of Provisional Assessment) Regulations, 2018. Rule 5
of the said Rule is reproduced hereunder:
5. Time-limit for finalisation of provisional
assessment. – (1) Theproper officer shall finalise the
provisional assessment within two months ofreceipt of:
(a) an intimation from the importer or the exporter or his
authorisedrepresentative or Customs Broker under sub-
regulation (7) ofregulation 4; or
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(b) a chemical or other test report, where the
provisionalassessment was ordered for that reason; or
(c) an enquiry or investigation or verification report,
where theprovisional assessment was ordered for that
reason.
Provided that where the documents or information
required to be furnishedby the importer or the exporter
or requisitioned by the proper officer aremade available
intermittently, the time period of two months shall
bereckoned from the date of last intimation referred to in
clause (a) above,:
Provided further that where the documents or
information required to befurnished by the importer or
exporter, as the case may be, or requisitionedby the
proper officer are not made available or made partly
available andno further extension of time has been
allowed under sub-regulations (3), (4)or (5) of regulation
4, as the case may be, the proper officer shall proceedto
finalise the provisional assessment within two months of
the expiry of thetime allowed for submission of the said
documents or information.
(2) The Commissioner of Customs concerned may
allow, for reasons to berecorded in writing, a further time
period of three months in case the properofficer is not
able to finalise the provisional assessment within the
period oftwo months as specified in sub-regulation (1)
above.
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(3) This regulation shall not apply to such cases of
provisionalassessments, where Board has issued
directions to keep that pending.
16.4 As per the aforesaid provisions, since no information
has been sought from the petitioner, the finalisation had to be done
within 2 months of receipt of the test reports; assuming that the first
and second test reports were not to be considered, it becomes
clear that the third test report obtained after taking consent of both
the sides and as ordered by the Court was obtained on 31.01.2025,
the finalisation had to take place before end of March 2025; even
on this date no such attempt seems to have been made to finalise
the said assessments and it was only on 23.05.2025 that the
respondents marked the bills of entry as provisional assessments
ostensibly in accordance with the aforesaid interim order dated
29.04.2025 which merely/only speaks of release of goods.
16.5 In fact, the communication sent to the petitioner vide
23.05.2025 talks of provisional release of goods where they
incidentally mention provisional assessment; needless to state that
these two terms are significantly different in their connotations as
one deals with release of goods seized under Section 110A while
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the other is provisional assessment under Section 18. The
importance of keeping time frames in doing provisional assessment
is dealt with by the Apex Court in Century Metal Recycling’s case
supra wherein it was held as under:
” The significance of Section 18 of the Act can be
understood in light of the above provisions. Section 18
provides for provisional assessment of duty in cases
specified in sub-section (1) of the Section. Clause (c) of
sub-section (1) deals with cases where importer or
exporter has produced necessary documents and
furnished full information for assessment of duty but the
proper officer deems it necessary to make further enquiry
for assessing the duty. However, Clause (d) is wider and
would apply when the importer or exporter does not
produce necessary documents or furnish information. In
all cases covered under Clauses (a) to (d), the proper
officer may direct provisional assessment of the duty
leviable on the imported goods. Where duty is assessed
provisionally, the importer or exporter has to furnish
security as the proper officer deems fit for payment of
deficiency, if any, between the duty provisionally paid and
the duty finally assessed.
On interpreting Section 18 of the Act, it is held that when
there is a dispute between the Customs authorities and
the importer as regards the valuation of the imported
goods, on satisfaction of the conditions enumerated in
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assessment of Customs duty under Section 18 of the Act.
This expedites clearance, pending final adjudication on
merits which may take time. This is also the mandate of
the Board Circular No. 38/2016, dated 22nd August,
2016. Any insistence and compulsion by the authorities
that the importer should disclaim and forgo his statutory
right under Section 18 of the Act would not be correct.
Neither would it be right to reject the valuation as
declared by the importer without reasonable doubt for
certain reasons.”
16.6 It is clear from the above enunciation of law that the
respondents had not only not adopted Section 17 but also has not
adopted the time lines specified in Section 18 and the objective of
ensuring timely assessment and clearance of goods have been
completely lost sight of and therefore, I am of the opinion that the
department could not have adopted a procedure not known to law
and take umbrage under the orders of this Court, which do not
support the case of the respondents and consequently, the attempt
on the part of the department to show that the goods are
provisionally assessed only on the directions of this Court is
erroneous and tantamount abdicating their basic responsibility to
conduct assessments as mandated in law. It is therefore clear
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respondents have not followed the procedure contemplated under
the provisions of the Customs Act including Section 17, 18 etc., and
as such, the various contentions urged by the respondents cannot
be accepted thereby leading to the sole/inescapable conclusion
that the impugned provisional assessment is contrary to law
warranting interference by this Court.
Point No.(i) is accordingly answered in favour of the
petitioner.
Re: Point No.(ii);
17. This point relates to the question as to whether the tariff
classification adopted by the respondents in relation to the subject
goods is legal, valid and proper; in this context, it is relevant to
state that while ordinarily, this Court would not examine disputes in
respect of classification which are to be left to the authorities, in the
facts and circumstances obtaining in the instant case wherein the
respondents have not acted in accordance with the assessment
procedures prescribed in law and have resorted to drastic
measures of seizing goods, it would be necessary to consider this
aspect of the matter also.
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17.1 In the interim order dated 29.04.2025 supra, I have
already come to the prima facie conclusion that the subject
imported goods are roasted areca nuts having a moisture content
of 5.9% and that the sample is different from raw areca nuts as per
the 2nd CRCL test report which was obtained with consent of both
parties pursuant to orders of this Court thereby indicating that this
test report is conclusive as to the nature of the subject imported
goods which are clearly roasted areca nuts as contended by the
petitioner and not raw arecanuts as contended by the respondents;
to reiterate, the aforesaid order passed by this Court was modified
only to the limited/restricted extent of modifying the terms and
conditions imposed by this Court for obtaining release of the
subject goods by the Hon’ble Division Bench in W.A.No.770/2025
dated 30.06.2025 and all other findings recorded by this Court
including the finding that the subject imported goods are roasted
areca nuts as contended by the petitioner have not been reversed
in the appeal. Under these circumstances, I am of the considered
opinion that the material on record clearly establishes that the
subject imported goods are clearly roasted areca nuts as
contended by the petitioner and not raw arecanuts as contended by
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the respondents whose contentions in this regard also cannot be
accepted.
17.2 I now consider this question in detail and find that the
question/issue as regards classification of roasted areca nuts came
up for consideration before the Madras High Court in the case of
CC vs Shahnaz Commodities International Ltd., – (2023) 9
Centax 183 (Madras), wherein it was held as under:
” 7. Before proceeding further, it may be necessary to refer to
the General Rules for Interpretation, relevant Tariff Entries
along with Chapter Notes and HSN Notes, and its relevance
for determining the classification, which are as under:
(i) General Rules for the Interpretation of Import Tariff:
“Classification of goods in this Schedule shall be governed
by the following principles:
1…..
3. When by application of rule 2(b) or for any other reason,
goods are, prima facie, classifiable under two or more
headings, classification shall be effected as follows:
a. The heading which provides the most specific
descriptions shall be preferred to headings providing a more
general description. However, when two or more headings
each refer to part only the materials or substances contained
in mixed or composite goods or to part only of the items in a
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HC-KARset put up for retail sale, those headings are to be regarded
as equally specific in relation to those goods, even if one of
them give a more complete or precise description of the
goods.
b. Mixtures, composite goods consisting of different
materials or made up of different components, and goods put
up in sets for retail sale, which cannot be classified by
reference to (a), shall be classified as if they consisted of the
material or component which gives them their essential
character, in so far as this criterion is applicable.
c. When goods cannot be classified by reference to (a)
or (b), they shall be classified under the heading which
occurs last in numerical order among those which equally
merit consideration.”
(ii) Relevant entries under the Customs Tariff Act:
Chapter 8
Edible fruit and nuts; peel of citrus fruit or melons
NOTES
1. This Chapter does not cover inedible nuts or fruits.
2. Chilled fruits and nuts are to be classified in the same
headings as the corresponding fresh fruits and nuts.
3. Dried fruit or dried nuts of this Chapter may be partially
rehydrated, or treated for the following purposes:
(a) for additional preservation or stabilization for
example, by moderate heat treatment, sulphuring, the
addition of sorbic acid or potassium sorbate;
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(b) to improve or maintain their appearance f or
example, by the addition of vegetable oil or small quantities
of glucose syrup), provided that they retain the character of
dried fruit or dried nuts.
4. Heading 0812 applies to fruit and nuts which have been
treated solely to ensure their provisional preservation during
transport or storage prior to use (forexample,
sulphurdioxidegas, in brine, insulphur water or in other
preservative solutions) ,provided they remain unsuitable for
immediate consumption in that state.”
Tariff Item Description of goods Unit Rate of duty
Standard Preferential Areas
(1) (2) (3.) (4) (5)
...... ............ .... ...... .......
0802 Other nuts, fresh or dried, whether or not
shelled or peeled
0802 80 - Areca nuts:
0802 80 10 --- Whole kg. 100% 90%
0802 80 20 --- Split kg. 100% 90%
0802 80 30 --- Ground kg. 100% 90%
0802 80 90 --- Other kg. 100% 90%
0802 90 00 - Other kg. 100%
Chapter 20
Preparations of vegetables, fruit, nuts or other parts of plants
Notes
1. This Chapter does not cover:
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(a) vegetables, fruit or nuts, prepared or preserved by
the processes specified in Chapter 7, 8 or 11;
(b) food preparations containing more than 20 by weight
of sausage, meat, meat offal, blood, fish or crustaceans,
molluscs or other aquatic invertebrates, or any combination
thereof (Chapter 16);
Tariff Item Description of goods Unit Rate of duty
Standard Preferential Areas
…..
2008 — ………….
Fruit, nuts and other edible parts of plants, otherwise
prepared or preserved, …..
whether or not containing added sugar or other sweetening
matter or spirit, not elsewhere specified or included
– Nuts, ground-nuts and other seeds, whether or not
mixed together:
2008 11 00 -- Ground-nuts kg. 30% -
2008 19 --- Other, including mixtures:
2008 19 10 --- Cashew nut, roasted, salted or roasted
and salted kg. 241[45%] -
2008 19 20 --- Other roasted nuts and seeds kg.
30% -
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2008 19 30 --- Other nuts, otherwise prepared or
preserved kg. 30% -
2008 19 40 --- Other roasted and fried vegetable
products kg. 30% -
2008 19 90 --- Other kg. 30% -
Chapter 21
Supplementary Notes
In this Chapter “betel nut product known as Supari” means
any preparation containing betel nuts, but not containing any
one or more of the following ingredients, namely: lime, katha
(catechu) and tobacco whether or not containing any other
ingredients, such as cardamom, copra or menthol.
Tariff Item Description of goods Unit Rate of
duty
Standard Preferential Areas
(1) (2) (3) (4) (5)
....... ... ............. ... ... .....
2106 Food preparations not elsewhere specified or
included
2106 90 30 --- Betel nut product known as "Supari"
kg. [150%] -
...... --- ........ ... ...... -
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(iii) Relevant portions of the HSN:
HSN Explanatory Notes:
Chapter 8
Edible fruit and nuts; peel of citrus fruit or melons
NOTES
1. This Chapter does not cover inedible nuts or
fruits.
2. Chilled fruits and nuts are to be classified in the
same headings as the corresponding fresh fruits and nuts.
3. Dried fruit or dried nuts of this Chapter may be
partially rehydrated, or treated for the following purposes:
(a) for additional preservation or stabilization by
moderate heat treatment, sulphuring, the addition of sorbic
acid or potassium sorbate);
(b) to improve or maintain their appearance by the
addition of vegetable oil or small quantities of glucose syrup),
provided that they retain the character of dried fruit or dried
nuts….
The Chapter further excludes:
(i) Fruit flour, meal and powder (heading 11.06).
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(ii) Edible fruit and nuts and peel of melons or
citrus fruit, prepared or preserved otherwise than as
described above (Chapter 20).
(iii) Roasted fruit and nuts (e.g., chestnuts,
almonds and figs), whether or not ground, generally used as
coffee substitutes (heading 21.01)
Chapter 20
This Chapter includes:
(1) Vegetables, fruit, nuts and other edible parts of
plants prepared or preserved by vinegar or acetic acid.
(2) Vegetables, fruit, nuts, fruit-peel and other parts
of plants preserved by sugar.
(3) Jams, fruit jellies, marmalades, fruit or nut
purées, fruit or nut pastes, obtained by cooking,(4 ) Homogenised prepared or preserved
vegetables and fruit.
(5) Fruit or vegetable juices, neither fermented nor
containing added alcohol, or of an alcoholic strength by
volume not exceeding 0.5 % vol.
(6 ) Vegetables, fruit, nuts and other edible parts
of plants prepared or preserved by other processes not
provided for in Chapter 7, 8 or 11 or elsewhere in the
Nomenclature.
….. It includes, inter alia:
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HC-KAR(1) Almonds, ground-nuts, areca (or betel) nuts and other
nuts, dry-roasted, oil-roasted or fat-roasted, whether or not
containing or coated with vegetable oil, salt, flavours, spices
or other additivesChapter 21
Miscellaneous edible preparations
Notes.
1. This Chapter does not cover:
(a) Mixed vegetables of heading 07.12;
(b) Roasted coffee substitutes containing coffee in
any proportion (heading 9.01);
(c) Flavoured tea (heading 9.02);
(d) Spices or other products of headings 9.04 to
09.10;
(e) Food preparations, other than the products
described in heading 21.03 or 21.04, containing more than
20% by weight of sausage, meat, meat offel, blood, fish or
crustaceans, molluscs or other aquatic invertebrates, or any
combination thereof (Chapter 16);
(f) Yeast put up as a medicament or other
products of heading 30.03 or 30:04; or
(g) Prepared enzymes of heading 35.07.
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2. Extracts of the substitutes referred to in Note 1 (b) above
are to be classified in heading 21.01.
3. For the purposes of heading 21.04, the expression”
homogenised composite food preparations” means
preparations consisting of a finely homogenised mixture of
two or more basic ingredients such as meal, fish, vegetables,
fruit or nuts, put up for retail sale as infant food or for dietetic
purposes, in containers of a net weight content not
exceeding 250 g. For the application of this definition, no
account is to be taken of small quantities of any ingredients
which may be added to the mixture for seasoning,
preservation or other purposes. Such preparations may
contain a small quantity of visible pieces of ingredients.”
8. Relevance of Common Parlance Test vis-a-vis Specific
Tariff Entry in determining Classification:
A perusal of the relevant entries under CTH 08, 20 and 21
would show that while CTH 08 is meant to cover areca nut
whole, split, grounded including dried nuts subject to the
process of drying which is by way of additional preservation
or stabilization by moderate heat treatment, sulphuring, the
addition of sorbic acid or potassium sorbate, Chapter 20
covers roasted nuts. Apparently, legislature has for the
purpose of classification treated drying and roasting as
processes which are distinct/different and importantly,
relevant in determining whether the nuts would fall under
CTH 0802 or under 2008. The submission of the learned
counsel for the appellant that roasted areca nut is in common
parlance treated as areca nut, in other words, by the process
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emerge and thus, keeping in view the restrictive language
employed in Chapter 2008 viz., exclusion of items covered
under CTH 8, the roasted areca nut would fall under CTH
0802, is misplaced. The said submission that the products
that are commercially the same, must be classified under
one heading, overlooks the fact that legislature is competent
to classify differently or make a distinction even though the
products in question are not commercially different. In this
regard, it may be useful to rely on the decision of the Hon’ble
Supreme Court in case of Sterling Foods v. State of
Karnataka, reported in (1986) 3 SCC 469 = 1986 (26) E.L.T.
3 (S.C.) wherein, while dealing with the question, whether
prawns, shrimps and lobsters locally purchased for export
after subject to the process of cutting their heads and tails,
peeling, deveining, cleaning, freezing and exporting was
eligible to claim the benefit as a sale in the course of export
under sub section (3) to Section 5. It was found that the
benefit ought to be extended as prawns/lobsters even after
being subject to the above processes do not lose their
identity, but commercially remain the same. Importantly, an
argument was advanced on the basis of the entries in the
Schedule to the Karnataka Act and the amendments made
thereto particularly in relation to classification of Shrimps,
Prawns and Lobsters to suggest that enumeration of Items in
different entries in the Tariff Schedule is by itself indicative of
the fact that they are commercially different. However, the
said contention was rejected by the Hon’ble Supreme Court
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in the following decisions, the relevant portion of which are
extracted below:
Sterling Foods v. State of Karnataka, (1986) 3 SCC
469=1986 (26) E.L.T. 3 (S.C.):
“8. This conclusion on principle was not disputed by the High
Court in its judgment and the High Court conceded that even
after processing such as cutting of heads and tails, peeling,
deveining, cleaning and freezing, shrimps, prawns and
lobsters subjected to such processing continued in common
parlance to be called “shrimps, prawns and lobsters”. But the
High Court took the view that Entry 13-a after the
amendment effected in it with retrospective effect from
September 1, 1978, made a distinction between raw
shrimps, prawns and lobsters and processed or frozen
shrimps, prawns and lobsters. In view of this distinction
made in entry 13-a, if was not possible to hold that
processed or frozen shrimps, prawns and lobsters were the
same commodity as raw shrimps, prawns and lobsters. The
argument was that when the State legislature itself made a
distinction between these categories of commodities by
making purchases of one category amenable to sales tax
under Entry 13-a and leaving out of the scope of taxation
under Entry 13-a the other category, how could it be said that
both these categories represent the same commodity and
there is no difference in character and identity between the
two. This argument, we are afraid, is not well founded. It is
based on a total misapprehension in regard to the true object
and intendment of entry 13-a and it erroneously seeks to
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HC-KARproject that entry in the interpretation and application of
Section 5 sub-section (3) of the Central Sales Tax Act. In fact
Entry 13-a as amended, supports the argument that even
processed or frozen shrimps, prawns and lobsters are known
commercially and in the trade as “shrimps, prawns and
lobsters”. It is because Entry 13-a as it stood prior to its
amendment, would have, on the plain natural meaning of the
expression “shrimps, prawns and lobsters”, included
processed and frozen shrimps, prawns and lobsters, that it
became necessary for the State legislature to amend Entry
13-a with retrospective effect so as to exclude from the
scope and ambit of that entry processed or frozen shrimps,
prawns and lobsters. Now when the State legislature
excluded processed or frozen shrimps, prawns and lobsters
from the ambit and coverage of Entry 13-a, its object
obviously was that the last purchases of processed or frozen
shrimps, prawns and lobsters in the State should not be
exigible to State sales tax under Entry 13-a. The state
legislature was not at all concerned with the question as to
whether processed or frozen shrimps, prawns and lobsters
are commercially the same commodity as raw shrimps,
prawns and lobsters or are a different commodity and merely
because the State legislature made a distinction between the
two for the purpose of determining exigibility to State sales
tax, it cannot be said that in commercial parlance or
according to popular sense, processed or frozen shrimps,
prawns and lobsters are recognised as different commodity
distinct from raw shrimps, prawns and lobsters. The question
whether raw shrimps, prawns and lobsters after suffering
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HC-KARprocessing retain their original character or identity or
become a new commodity has to be determined not on the
basis of a distinction made by the State legislature for the
purpose of exigibility to State sales tax because even where
the commodity is the same in the eyes of the persons
dealing in it the State legislature may make a classification
for determining liability to sales tax. This question, for the
purpose of the Central Sales Tax Act, has to be determined
on the basis of what is commonly known or recognised in
commercial parlance. If in commercial parlance and
according to what is understood in the trade by the dealer
and the consumer, processed or frozen shrimps, prawns and
lobsters retain their original character and identity as
shrimps, prawns and lobsters and do not become a new
distinct commodity and are as much “shrimps, prawns and
lobsters”, as raw shrimps, prawns and lobsters, sub-section
(3) of Section 5 of the Central Sales Tax Act would be
attracted and if with a view to fulfilling the existing contracts
for export, the assessee purchases raw shrimps, prawns and
lobsters and processes and freezes them, such purchases of
raw shrimps, prawns and lobsters would be deemed to be in
course of export so as to be exempt from liability to State
sales tax.”
(emphasis supplied)
9. From a reading of the above judgment, it is clear that the
Hon’ble Supreme Court had held that the legislature while
classifying shrimps, prawns and lobsters and treating it
differently/separately from frozen shrimps, prawns lobsters
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by placing it under different entries, has unconcerned as to
whether the two products are commercially same. This is, in
view of the fact that legislature was competent to classify the
products separately/differently even though they are
commercially one and the same. Thus, the question of
examining whether arecanut/betel nut and roasted areca nut
are commercially the same or otherwise, is an enquiry which
is alien in determining the classification which ought to be
made on the basis of the Tariff entries. Once legislature has
chosen/provided for separate and independent entry under
the Tariff for roasted areca nut, it is no longer necessary nor
open to examine whether roasted areca nut is commercially
the same as areca nut or whether the process of roasting
results in emergence of a commercially new/different
commodity having a different name, character and use. It
really does not matter whether roasting of betel nut results in
emergence of a new commodity for even if it does not, it is
still open to the legislature to classify the product differently.
Once the legislature has classified roasted betel/arecanut
under a separate entry, it is not open to the Revenue to
discard/abandon the entries in the Tariff while
examining/determining the classification of the product.
10. Relevance of HSN Explanatory Notes in determining
classification under CTH
Secondly, there is considerable force in the submission of
the learned counsel for the respondents that the
classification as far as possible must be in conformity and in
consonance with the HSN Explanatory Notes. Perusal of
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HSN Explanatory Notes would leave no room for doubt that
“roasted areca nut” has been treated as falling under
Chapter 20. The relevant portion of HSN Explanatory notes
is extracted hereunder for better appreciation:
It includes, inter alia:
(1) Almonds, ground-nuts, areca (or betel) nuts and other
nuts, dry-roasted, oil-roasted or fat-roasted, whether or not
containing or coated with vegetable oil, salt, flavours, spices
or other additives10.1 To appreciate the relevance of HSN Notes in
determining classification, it may be relevant to refer to the
following judgments of the Hon’ble Supreme Court:
(i) CCE & Customs v. Phil Corpn. Ltd.,(2008) 17
SCC 569 = 2008 (223) E.L.T. 9 (SC):
“30. In a number of cases, this Court has clearly enunciated
that HSN is a safe guide for the purpose of deciding issues
of classification. In the present case, the HSN Explanatory
Notes to Chapter 20 categorically state that the products in
question are so included in Chapter 20. The HSN
Explanatory Notes to Chapter 20 also categorically state that
its products are excluded from Chapter 8 as they fall in
Chapter 20. In this view of the matter, the classification of the
products in question has to be made under Chapter 20.”
(Emphasis Supplied)
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(ii) LML Ltd. v. Commr. of Customs, (2010) 10
SCC 503 = 2010 (258) E.L.T. 321 (SC)/[2010] 1
taxmann.com 333 (SC):
“13. In CCE v. Wood Craft Products Ltd. [(1995) 3 SCC 454]
it was held by this Court that as expressly stated in the
Statement of Objects and Reasons of the Central Excise
Tariff Act, 1985, the Central Excise Tariffs are based on the
Harmonised System of Nomenclature (HSN) and the
internationally accepted nomenclature was taken into
account to reduce disputes on account of tariff classification.
Accordingly, for resolving any dispute relating to tariff
classification, a safe guide is the internationally accepted
nomenclature emerging from the Harmonised System of
Nomenclature (HSN).
(Emphasis Supplied)
10.2 The above judgments would show that HSN is a safe
guide in resolving dispute relating to Tariff classification. A
perusal of HSN Explanatory Notes would show that Chapter
20 would cover roasted areca/betel nuts. The AAR being in
conformity with the HSN Explanatory Notes, which are
treated to be a safe guide in matter of Tariff classification, is
yet another reason as to why it would not warrant
interference.
11. Rule of Specific vis-a-vis General Entry in determining
classification – Process of Roasting of Betel nuts vis-a vis
other process, such as, drying, boiling, etc.
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Thirdly, it is trite law that whenever there is specific entry, the
same would prevail over general entry. The said general
principle is statutorily incorporated in General Rules of
Interpretation, in particular, under Rule 3(a) of the General
Rules of Interpretation, which reads as under:
“3. When by application of Rule 2 (b) or for any other reason,
goods are, prima facie, classifiable under two or more
headings, classification shall be effected as follows :
(a) The heading which provides the most specific
description shall be preferred to headings providing a more
general description. However, when two or more headings
each refer to part only of the materials or substances
contained in mixed or composite goods or to part only of the
items in a set put up for retail sale, those headings are to be
regarded as equally specific in relation to those goods, even
if one of them gives a more complete or precise description
of the goods….”
(emphasis supplied)
11.1 Now, applying the above test to the competing entries
viz., CTH 080280 and CTH 2008 1920, we find that while
CTH 080280 covers areca nuts which are “fresh or dried
whether or not shelled or pealed”, chapter 2008 19 20 covers
“other roasted nuts and seeds” which include roasted areca
nuts. Importantly, Note 3 to Chapter 8 provides that dried
nuts covered under the said Chapter are those which are
partially rehydrated or treated for additional preservation or
stabilization by moderate heat treatment, sulphuring, addition
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of sorbic acid or potassium sorbate. Note 1 (a) to Chapter 20
expressly excludes nuts prepared or preserved by the
“processes specified in Chapters 7, 8 or 11”, while
classifying roasted nuts and seeds. It is thus evident that
roasting and drying are treated to be distinct for the purposes
of classification under the Customs Tariff Heading. Any
construction to the contrary would result in rendering Note 1
(a) to Chapter 20 which excludes the process specified in
Chapter 8 of CTA, redundant. While fresh or dried areca nuts
are covered by 080280, roasted areca nuts are covered
under 2008 19 20. Roasting is a process which has been
treated to be distinct from drying and has been the basis for
fixing the classification under Customs Tariff Heading under
2008 19 20.
11.2 Having examined the scope of CTH 08 and 20, it may
be relevant to examine CTH 21 which is another entry
dealing with Betel Nut known as “supari”. Incidentally, CTH
21 06 includes betel nut product known as supari. The Note
to Chapter 21 of Customs Tariff covers “betel nut products”
known as “supari” containing betel nuts, but not containing
anyone or more of the following ingredients viz., lime, katha
(Catechu) and Tobacco whether or not containing any other
ingredients, like cardamom, menthol. The expression
“containing” in the said Note is indicative of the fact that the
Entry covers preparations of betel nut, which contains betel
nut along with other items/ingredients. In other words,
“Supari” is a product which contains betel nut as one of the
ingredients and would have no applicability to the facts of the
present case, for admittedly, there is no other item/product
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HC-KARother than betel nut (roasted) which is involved in the instant
case.
11.3 We would think that CTH 2008 19 20 is a special entry
covering nuts subject to the process of roasting, when
contrasted with CTH 08 02 90 which covers dried nuts.
Having come to the conclusion that the classification of areca
nut is made on the basis of the process which it is subject to
with a distinction between dried and roasted nut being
maintained, we would think that CTH 2008 19 20 which
covers roasted nuts including areca nut is a specific entry
when contrasted with the entries/items covering nuts under
CTH 08.
11.4 It is well established that when a general law/entry and
a special law/entry dealing with same aspect are in question,
the rule adopted and applied is one of harmonious
construction, whereby the general law to the extent dealt with
by the special law, would yield to the Special Law/Entry. This
principle finds its origins in the Latin maxim of
generaliaspecialibus non derogant i.e. general law yields to
special law should they operate in the same field on same
subject. The maxim generaliaspecialibus non derogant is
dealt with in Vol. 44(1) of the 4th Edn. of Halsbury’s Laws of
England at Para 1300, as follows:
“The principle descends clearly from decisions of the House
of Lords in Seward v. Vera Cruz [(1884) LR 10 AC 59 ] and
the Privy Council in Barker v. Edger [1898 AC 748 )] and has
been affirmed and put into effect on many occasions….
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HC-KARCorpus Juris Secundum, 82 C.J.S. Statutes 482 states:
when construing a general and aspecific statute pertaining to
the same topic, it is necessary to consider the statutes as
consistent with one another and such statutes therefore
should be harmonised, if possible, with the objective of giving
effect to a consistent legislative policy. On the other hand,
where a general statute and a specific statute relating to the
same subject-matter cannot be reconciled, the special or
specific statute ordinarily will control. The provision more
specifically directed to the matter at issue prevails as an
exception to or qualification of the provision which is more
general in nature, provided that the specific or special statute
clearly includes the matter in controversy (Edmond v. United
States [137 L Ed 2d 917], Warden v. Marrero [41 LEd 2d
383]).”
16. To sum up:
(a) Roasting is a process treated to be distinct from
the process of boiling and drying, in fixing the classification in
respect of betel/areca nut under CTH.
(b) Roasted betel/areca nut having been
specifically classified under CTH 2008 19 20, the attempt to
classify under CTH 08 02 80 would fall foul of the settled rule
of construction that specific entry would prevail over general
entry.
(c) HSN explanatory notes is normally a safe guide
in determining classification under CTH. Roasted areca/betel
nut having been mentioned in CTH 2008 19 20 under HSN,
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the impugned Ruling is in consonance with HSN
classification.
(d) When there is a specific entry covering a
product/commodity, the test of common parlance is irrelevant
in determining classification.”
17.3 This judgment was followed by the Allahabad High
Court in the case of Rawder Petroleum Pvt.Ltd vs UOI – (2025)
32 Centax 169, wherein it was held as under:
“28. This Court finds that the CAAR, New Delhi has in no
manner missed the woods for the tree and has addressed all
the points meticulously, including the issues, which are
presently being agitated by the department in the present
Appeals. In the Appeal filed by the department, it has been
submitted that the basis of classification of ‘roasted areca
nuts’ is a letter dated 04.06.2024, explaining the
phenomena/activity undertaken on these areca nuts. It has
been contended by the department that the said letter has
been issued by one M/s ANL(S) Trading & services Pte Ltd.,
Singapore, which according to them is a third party as the
country of origin of the goods in question is Indonesia, for
which they have relied on the Bill of entry filed by the
importer. It has been contended by them that since the letter
of process of roasting has not been issued by the owner of
goods, the letter dated 04.06.2024, explaining the process of
roasting is meaningless and cannot be the actual process
undertaken on the imported goods. First & foremost, this
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HC-KARcourt finds that the Bill of entry although speaks of country of
origin as Indonesia, however the supplier details mentions
the name of ANL(S) Trading and services Pte Ltd, of
Singapore, therefore apparently although the goods imported
have been sourced from Indonesia, however the same has
been supplied by ANL(S) Trading and Services Pte Ltd. and
as such the argument raised by the department seems to be
highly technical, which are merely recorded to be rejected.
Further, it is seen that the Bill of entry contains the
description of the commodity being imported as “roasted
areca nuts”. In any case, it must be understood that the
CAAR was examining the phenomena/activity explained and
undertaken on the areca nuts in the said letter dated
04.06.2024, which were proposed to be imported and not
actually imported, whether it was from Indonesia or from
Singapore. It is one thing to say that the advance ruling was
obtained for commodity “X” and the commodity actually
imported was “Y”, in which case the advance ruling obtained
for the commodity ‘X’ would not be applicable to the
commodity ‘Y”, as the same would be change in fact and not
binding on the parties as per Section 28J(2) of the customs
Act. However, it is absolutely erroneous to say that the
advance ruling obtained for commodity ‘X” would not be
applicable for actually imported commodity ‘X” as in this
case, the advance ruling would be binding between the
parties as per Section 28J of the Customs Act.
29. Pertinently, the department has mixed the concept of
advance ruling, which relates to proposed import with the
actual importation of commodity by the importer. The
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ground that the commodity sought to be imported by the
importer at the stage of advance ruling were not sent for
independent testing or verification of the process, supporting
documents, test reports etc. However, this court finds that
such an argument by the department is completely alien to
the concept of advance ruling. Section 28E(b) of the
Customs Act inter-alia states that ‘advance ruling’ means a
written decision on any of the questions referred to in Section
28H raised by the applicant in his application in respect of
any goods prior to its importation or exportation. Further,
Section 28I(2) of the said Act says that the authority may
after examining the application and records called for, by
order, either allow or reject the application and proviso
appended to its says that the application for advance ruling
has to be rejected in two situation (a) when the question
raised in the application is already pending in the applicant’s
own case before any officer of customs or Appellate
Authority or any court or (b) the question raised has already
been decided by the Appellate Authority or any court.
Similarly, section 28I(4) of the Act says that where an
application is allowed under sub-section (2), the Authority
shall, after examining such further material as may be placed
before it by the applicant or obtained by the Authority,
pronounce its advance ruling on the question specified in the
application. A conjoint reading of these Sections 28I(2) &
28I(4), clearly demonstrates that 28I(4) envisages a situation
wherein the advance ruling already decided in terms of
section 28I(2) is sought to be reviewed, by examining further
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HC-KARmaterials placed by the applicant or obtained by the
Authority. No doubt, the advance ruling ought to be based on
the materials brought on record of the advance ruling
authority, however to say that advance ruling ought to be
mandatorily based on the empirical data, test or laboratory
report of a sample, at the stage of advance ruling, when
these samples, may nor may not be even in existence for the
purpose of export or import, is in aberration to the concept
and scope of ‘Advance ruling’. This court finds that at the
stage of advance ruling, the process as explained by the
importer/exporter on the commodity, to bring out a new
commodity in existence is a vital tool in arriving at a decision
for advance ruling on the tax liability, by making them
classifiable under a particular CTH. As far as the present
case is concerned, this court finds that although, it can be
well argued by the department that the commodity, now
imported as per the test reports are not ‘roasted areca nuts’,
however it cannot be argued that since the advance ruling is
not based on any testing or verification of the commodity
sought to be imported at the stage of advance ruling is liable
to be set-aside, merely because the advance ruling authority
did not examine any test or laboratory report of the
commodity sought to be imported/exported. It has to be
understood that at the stage of advance ruling, there is no
actual commodity as everything is proposed and the CAAR
is invited to give an advance ruling on the assumption that
the process undertaken on the commodity proposed to be
imported are identifiable in definite terms.
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30. This Court finds that the CAAR has examined the
process-flow for bringing the ‘roasted areca nuts” in
existence and having been convinced on the facts as well as
the prevailing law of the subject, has arrived at a just
decision that ‘roasted areca nuts’ is to be classified under
chapter 20 of the Customs Tariff Act. According to this court,
the department is not disputing the process undertaken by
the importer, but is rather questioning the end product
obtained by the process undertaken by them. The
department, apparently seems to be vaguely trying to build a
case that “roasted areca nuts” obtained even by the process
demonstrated by the importer, could not be classified under
Chapter 20 and should be classified under chapter 08.
Having said so, it becomes incumbent on this court to refer
to the two competing entries. Chapter 8 of the customs Tariff
cover goods described as ‘Edible fruit and nuts; peel or citrus
fruit or melons”. The relevant Tariff item 0802 is set out
below:
0802 Other nuts, fresh or dried, whether or not shelled or
peeled
0802 11
– Almonds:
00
- In Shell
0802 12
00
- Shelled
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0802 21 - Hazalnuts or filberts 9 Corylus sup.)
00
- In Shell
0802 22
- Shelled
00
- Walnuts
0802 31
00
- In Shell
0802 32
- Shelled
00
- Chestnuts (Castanea spp.)
0802 41
00 - In Shell
0802 42 - Shelled
00
- Pistachios
0802 51
- In Shell
00
- Shelled
0802 52
00
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0802 61 - Macadamia nuts
00
- In Shell
0802 62
- Shelled
00
- Kola nuts (Cola Spp.)
0802 70
00
- Areca nuts
0802 80
- Whole
0802 80
- Split
10
- Ground
0802 80
20 - Other
0802 80 - Other
30
0802 80
90
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0802 80
00
31. Chapter 20 of the Customs Tariff covers goods under the
heading ‘preparation of vegetables, fruit, nuts or other part of
plants’. The relevant Tariff Item is quoted below:
2008 Fruits, Nuts and other Edible parts of plants, otherwise
prepared or preserved, whether or not containing addedsugar or other sweetening matter or spirit, not elsewhere
specified or included.
2008
11 – Nuts, groundnuts and other seeds, whether or
00 notmixed together;
2008 - Ground Nuts 19 - Other, including mixtures 2008 - Cashew nut, roasted, salted or roasted and 19 salted 10 - Other roasted nuts and seeds 2008 - 77 - NC: 2026:KHC:15737 WP No. 33823 of 2024 C/W WP No. 17776 of 2025 WP No. 24075 of 2025 HC-KAR 19 - Other nuts, otherwise prepared or preserved 20 - Other roasted and fried vegetable products 2008 - Other 19 30 2008 19 40 2008 19 90
32. This Court in examining the classification of ‘roasted
areca nuts”, finds that as a matter of fact, there is no
definition of “roasted” given in the Custom Tariff Act. As far
as Chapter 08 is concerned, it speaks of process like chilling
or steaming, boiling, drying and provisionally preserving. It is
important to note that although, the said chapter contains the
entry of areca nuts at “0802 80” and consists of whole, split,
ground and other forms, but the description of these items
has to be understood in the form it assumes after the
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process as mentioned under the said chapter is undertaken
on them. That is to say, the end product obtained by the
process mentioned in this chapter becomes significant for its
classification. It has been rightly held by the CAAR that there
is a marked difference between the processes of moderate
heat treatment & dehydrating/drying referred in chapter 8
and processes of dry-roasting, oil-roasting and fat-roasting
referred in Chapter 20. Although, the terms dry-roasting, oil-
roasting and fat roasting are also not defined in the Customs
Tariff Act, 1975, however, these terms have to be
understood in a commonly accepted sense. Further, this
court has no hesitation in subscribing to the view of CARR
that in common trade parlance, “drying” is a method of food
preservation by the removal of water content, whereas on
the other hand, “roasting” means the excess or very high
heat treatment that produces fundamental chemical and
physical changes in the structure and composition of the
goods, bringing about a charred physical appearance.
Therefore, while drying is a moisture removal process
involving methods such as dehydration, evaporation, etc.,
whereas roasting is a severe heat treatment process. The
end product changes with the degree of heat it is subjected
at the time of processing.
33. Further, it also has to be understood that as per Note 1
(a) to Chapter 20, the Chapter does not cover vegetables,
fruits or nuts prepared or preserved by the processes
specified in Chapters 7, 8 or 11. Therefore, vegetable, fruit or
nut products or preparations made other than by the
processes specified in Chapters 8 like freezing, steaming,
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boiling, drying, provisionally preserving and milling etc. are
liable to be classified under a different head, which is
Chapter 20. It is easily verifiable that the Heading 2008
covers fruits, nuts and other edible parts of plants, otherwise
prepared or preserved, whether or not containing added
sugar or other sweetening matter or spirit, not elsewhere,
specified or included.
34. This Court finds that roasting is a process used for
bringing in to existence roasted nuts and finds that the
processes mentioned in chapter 8 do not cover roasting
process. Further, this court cannot be oblivious to the fact
that roasting, as submitted by the importer by virtue of letter
dated 04.06.2024 issued by ANL(S) Trading & services
Pte Ltd., Singapore, is carried out using roasting ovens due
to which betel nuts are roasted in the range of 150 degrees
Celsius then cooled in room temperature and the cycle is
repeated until the moisture content is less than 6%. This
clearly indicates that the roasting is much more than mild
heat treatment. Even in the generally understood meaning of
the terms, it is understood that roasting involves severe heat
treatment and is different from moderate heat treatment as
well as dehydration. Thus, drying and roasting cannot be
equated and both the process are diametrically different.
35. Additionally, this court finds that the Hon’ble High Court
of Madras in its judgement on Civil Miscellaneous Appeal
(CMA) No’s 600/2023, No. 1206/2023 and No. 1750/2023,
dated 01.08.2023, had upheld the classification of ‘Roasted
areca Nuts’ under CTH 2008 19 20. Further, this court takes
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Judicial notice of the recent development, wherein a
Notification No. 02/2025-26 dated 02.04.2025 has been
issued by the Department of Commerce, Directorate General
of Foreign Trade, relating to “amendment in import policy
and policy condition of Roasted Areca Nuts falling under
ITC(HS) Code 2008 19 20 of chapter 20 of ITC(HS), 2022,
Schedule-I(Import Policy). The effect of the said notification
is that the import policy of ‘roasted Areca nuts’ falling under
ITC (HS) Code 08028090 and 2008 19 20 stands revised
from “free” to “prohibited” and a kind of clarification has been
sought to be given by the department, that as far as the Tariff
entry 2008 19 20 relating to other roasted nuts and seeds
are concerned, “roasted areca nuts” are not covered as they
are specifically covered under 08028090.
36. In view of the aforesaid recent development, it can be
safely concluded that a doubt always existed in the mind of
the department relating to the tariff entry of ‘roasted areca
nuts”, otherwise there was no occasion nor any need for
issuance of the recent notification dated 02.04.2025, wherein
the department was compelled to clarify and specify in clear
terms that ‘roasted areca nuts’ are not covered under ITC
(HS) Code 2008 19 20 as they are specifically covered under
08028090.
37. As a sequel to the above discussion and in view of the
CAAR findings, this Court holds that “roasted areca nuts’
have been rightly classified under Tariff Entry 2008 19 20.
The grounds raised by the department in Custom Appeal No.
3 of 2024, challenging the advance ruling dated 19/09/2024
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is unmerited and, as such, the same is, accordingly,
dismissed. As a result of dismissal of Custom Appeal No. 3
of 2024, connected Custom Appeal No. 3 of 2025 also
stands dismissed on similar terms.
38. As far as the second issue relating to whether the
commodity imported by the importer/petitioner of the Writ
Tax No. 71 of 2025 are “roasted areca nuts”, so as to be
classifiable under CTH 2008 19 20 or are merely dried areca
nuts and could be classified under CTH 080280 is
concerned, the test reports gains prominence. It is pertinent
to mention herein that the commodity was imported on
06.11.2024 and samples were drawn from the said
commodity from time to time. The test report drawn from the
samples drawn from the commodity imported by the
importer, along with the date of collection of samples and the
testing, whether being in conformity with the existing
guidelines or not, can be displayed in a tabular chart in the
following manner:
Consonance
with
guidelines of
Date of Date of Date of Moisture
18/07/2017, Testing
Collection of Receiving preparation of Content of
report agency
Sample of sample Report Commodity
should be
within 5
days
1. First
18/11/2024 19/11/2024 22/11/2024 Yes 3.39%
Lab,
Gurgaon27/11/2024 16/12/2024 No (sample
2. CRCL,
18/11/2024
received 7.09% New
after 9 days) Delhi
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3. Yes,
Inference
drawn that
commodity
First
18/11/2024 19/11/2024 18/12/2024 is ‘roasted
3.9% Lab,
areca nuts”
Gurgaon
and fit for
Human
consumptio
n
4. 17/01/2025
(In view of the
No (sample
directions of CRCL,
received
this 11/02/2025 24/02/2025 7.24% New
after 25
court vide order Delhi
days)
dated
17.12.2024)
39. It has been contended by the learned counsel for the
importer that there had been a gross violation of the
guidelines dated 18/07/2017, issued by Central Board of
Excise and Customs wherein it is clearly mentioned that the
samples ought to be drawn in the presence of the importer
for testing purposes. Further, in Clause 2(a) it is specifically
provided that the test reports if are adverse or otherwise
shall be communicated to the importer and in clause 2(b) it
further states that the importer can request the Additional
Commissioner/Joint Commissioner of Custom for re-test.
According to the learned Counsel, as per clause 2(c), when
the Custom Officer provides the opportunity for second test,
he must clearly indicate in writing where the second test can
be carried out and such referral laboratory where desired re-
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testing facility exists and in clause 2(d) it provides that the
sample should be marked as immediate for avoiding delays
and most importantly, as per clause 2(e) it provided the
presence of the importer at the time of drawing of samples,
and the importer or representative should be present and
certify the sample drawn. It is the contention of the learned
counsel for the importer that although an elaborate and time-
tested procedure existed for drawing of the samples and
contained the rights and duties of the parties, however none
of the guidelines has been followed by the department while
drawing samples in the first instance or at the time, the
samples were sent for re-testing to the CRCL, New Delhi. On
the other hand, the learned counsel appearing for the
department, although did not dispute the existence of the
said guidelines nor it confirmed its compliance, however has
contended that the same is merely directory and not
mandatory and did not effect the issue raised in the present
petition. No doubt the guidelines mentioned and relied upon
herein above are directory, however this court finds that the
elaborate process mentioned for sample testing is in aid of
the principle of natural Justice. In the present case, the very
conduct of the department in drawing the samples behind the
back of the importer and not providing them with the sealed
samples and test memo by taking shelter of Section 144 of
the Customs Act, 1962 cannot be countenanced. Further, the
rules specifically provides the importer for applying for
retesting, in case they are not satisfied with the first test
report, this court fails to understand as to how the
department cannot be satisfied with any test report in the first
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place. The act of the department apparently seems to be
motivated and suspicious, in not providing the impugned
letter dated 27.12.2024 in the first instance and then not
taking the importer in confidence while sending for re-testing,
if at all re-testing was permissible by the state as per the
rules.
40. Time and again, this Court has held that in a welfare
state, the power and function of the executive should be
above suspicion like the Caesar’s wife. The State is
expected to be impartial, unbiased and lead the way in
adhering to legal and ethical standards. In the context of
sample drawing for analysis and testing, the state should
ensure that samples are collected and analysed according to
established procedures, preserving their integrity and
reliability. This includes drawing samples in a manner that
avoids tampering, contamination, or alteration, and ensuring
that the analytical methods used are valid and reliable.
Furthermore, the state must ensure that the Guidelines
formulated is followed as the role and responsibility of the
state is not of an adversarial litigator, but as an epitome of
follower of law. The state cannot have the concession of not
following the guidelines, which they themselves have
formulated for proper administration, irrespective of whether
it is mandatory or directory.
41. Further, this Court cannot be oblivious of the fact that the
import is governed by the Food Safety and Standards
(Import) Regulations, 2017, wherein the regulations 9(9) and
9(10) specifically provides that in case, if the test results of
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the first sample are adverse, then it is only the importer, who
can make an Application for its Re-testing and only thereafter
it could have been sent for Re-testing. However, in the
present case, after sending the sample on 19/11/2024, the
department on their own and without any reasons have sent
another sample on 27/11/2024 to another laboratory after 5
days from receipt of report dated 22/11/2024 which dehors
the provisions of the Regulations of 2017. Even, the
Guidelines dated 12/07/2022, issued by Food Safety
Standards Authority of India, has been seemingly ignored, as
although the said guidelines provide for compliance for time-
limit for analysis of sample under clause 2(ii), to be of 5 days
from the receipt of the sample in case of ‘Import’, however
the department has flouted the said timeperiod as is
apparent from the tabular chart incorporated herein above,
wherein the samples are received by the testing center after
9 and 25 days respectively.
42. There is no reasons forthcoming as to why and in what
circumstances, the second samples were drawn by the
department and that too without any application by the
importer, as per the rules. No sustainable grounds have
been made out by the department against the test-reports of
First Lab, Gurgaon, nor any reasons have been forthcoming
disputing the test results of the said First Lab, Gurgaon. This
Court finds that the test-result obtained from First Lab for
samples drawn by the department, immediately after its
import, shows the moisture content of ‘roasted areca nuts’ to
be 3.39%. The said test-report has been obtained for a
sample, which was collected on 18.11.2024 and was
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received in the testing agency on 19.11.2024 and most
importantly, the report was prepared within 5 days of its
receipt i.e on 22.11.2024. Seemingly, the said report, which
is the earliest report, appears to be the most authentic report
meeting the guidelines of the FSSA as well as the Customs
Department and this court finds no plausible reasons for
denying the benefit of the said earliest and/or first report to
the importer.
43. The lackadaisical attitude of the department in not
following the established guidelines relating to drawing
samples and sending for testing cannot be given concession
to in any manner. Apparently, it seems the department
indiscriminately drew samples and sent to testing Centre at
its own whims and wanted to keep the importer at bay during
the pendency of the Appeal filed by them against the
advance ruling, relating to classification of ‘roasted areca
nuts’. The act of the department in relying on a test report,
which could not have been carried out in the first place, also
seems to be ill-founded. Thus, the seizure of the commodity
‘roasted areca nuts’ apparently seems to be motivated and
driven by malafide and cannot be allowed to be sustained.
44. For all the above reasons, Writ Tax No. 71 of 2025
deserves to be allowed, in the peculiar facts and
circumstances of the present case. This Court while directing
for the release of the commodity imported as ‘roasted areca
nuts” classified under CTH 2008 19 20 on usual compliances
of the prevailing rules, hereby quashes the seizure memo
dated 10/03/2025. It is made clear that this court has only
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dealt with the issue relating to classification of the ‘roasted
areca nuts’ imported by the petitioner under CTH 2008 19 20
and has not expressed any opinion on the other avenues of
the import or any issue not raised in these Appeal/petitions.
Further, it is directed that since, these ‘roasted areca nuts’
had been imported some six months ago, the aforesaid
direction for release, is subject to the condition that the
importer provides for treatment of these roasted areca nuts
by ‘Gamma Irradiation process’, wherein the moulds and
insect’s in nuts can be sterilized/ treated as per the
proposition of treatment laid down by the Bhaba Atomic
research Centre, Trombay, Mumbai, to the compete
satisfaction of the authority.
17.4 I am in respectful agreement with the view expressed
in the aforesaid judgments and consequently, I am of the opinion
that the subject imported goods are roasted areca nuts which merit
classification under Chapter 20 for the following additional reasons:
• Both the 1st and 2nd test reports of CRCL would conclusively
establish that the goods are roasted areca nuts carrying a
moisture content of 5.9%;
• The goods are also different from raw areca nuts as is
forthcoming from the CRCL reports which also mention that it is
‘other than’ dried which would mean that the moisture content
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just drying which is why the term “roasted” is used as contrasted
with ‘dried’ areca nuts;
• The classification of the goods under the customs tariff and the
HSN clearly point towards roasted areca nuts falling under
Chapter 20 as elaborately explained in the aforesaid judgments;
• It is also relevant to mention that since the Food Safety
standards are to be met, the petitioner had produced a FSSAI
certification dated 24.9.2024 showing the imported goods to be
compliant with roasted areca nuts and even subsequently, one
more report dated 20.5.2025 was also filed by the petitioner with
the customs department;
• So also, the DGFT vide its notification dated 2.4.2025 initially
tried to revise the classification of roasted areca nuts to Chapter
8 but rectified the same vide subsequent notification dated
15.10.2025 classifying the said products under Chapter 20.
17.5 Under these circumstances, I am of the view that tariff
classification adopted by the respondents in relation to the subject
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goods is contrary to facts and law and that the same are to be
classified under Chapter 20 as contended by the petitioner.
Accordingly, Point No.(ii) is also answered in favour of the
petitioner.
Re: Point No.(iii);
18. The next question that arises for consideration is as to
whether the valuation done by the respondents in relation to the
subject goods is in accordance with law; in this context, as rightly
contended by the learned Senior Counsel for the petitioner, the
subject goods having been imported on 06.09.2024, it is this date
which would be relevant for the purposes of fixing the rate and the
tariff valuation as per Section 15 of the Customs Act; the Apex
Court in the case of UOI vs G.S.Chatha Rice Mills – 2020 (374)
ELT 289 held as under:
” 16. Chapter V of the Customs Act provides for the levy of
and exemption from customs duties. Section 12(1), which is
the charging provision, provides for the levy of duties of
customs on goods imported into, or exported from India at
the rates specified by the Customs Tariff Act or, in any other
law for the time being in force. Section 15(1) is extracted
below :
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HC-KAR“15. Date for determination of rate of duty and tariff
valuation of imported goods. – (1) The rate of duty and
tariff valuation, if any, applicable to any imported goods, shall
be the rate and valuation in force, –
(a) in the case of goods entered for home consumption
under Section 46, on the date on which a bill of entry in
respect of such goods is presented under that section;
(b) in the case of goods cleared from a warehouse under
Section 68, on the date on which a bill of entry for home
consumption in respect of such goods is presented under
that section];
(c) in the case of any other goods, on the date of payment
of duty :
Provided that if a bill of entry has been presented before the
date of entry inwards of the vessel or the arrival of the
aircraft or the vehicle by which the goods are imported, the
bill of entry shall be deemed to have been presented on the
date of such entry inwards or the arrival, as the case may be.
The provisions of this section shall not apply to baggage and
goods imported by post.”
(emphasis supplied)
17. Section 12 specifies that the rates of duty on goods
imported and exported are those which are provided in the
Customs Tariff Act or in any other law. Section 12 does not
indicate when the duties under those enactments will come
into being or force. Section 15 specifies the date with
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reference to which the rate of duty and tariff valuation of
imported goods is determined. Clauses (a), (b) and (c) of
sub-section (1) of Section 15 contain distinct provisions
which apply to :
(i) in respect of such goods is presented under that
Section. In relation to the rate of duty, the effect of clause (a)
of Section 15(1), is that the rate which is in force on the date
on which a bill of entry is presented under Section 46 (in the
case of goods entered for home consumption) is applicable
to the imported goods. When the duties come into force
under the enactments imposing them is dependent on and
defined by the terms of the particular enactment.
18. Chapter IX of the Customs Act contains provisions for
warehousing. Section 68 which falls under that Chapter
stipulates that goods which have been warehoused may be
cleared for home consumption if :
(a) A bill of entry for home consumption has been
presented;
(b) Import duty, interest, fine and penalties, as applicable,
have been paid; and
(c) An order for clearance for home consumption has been
made by the proper officer.
Provided that the order referred to in clause (c) may also be
made electronically through the customs automated system
on the basis of risk evaluation through appropriate selection
criteria.
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For goods which are cleared from a warehouse under
Section 68, clause (b) of Section 15 (1) provides that the rate
of duty and valuation are those “in force” “on the date” on
which a bill of entry for home consumption is presented
under Section 68. In the case of other goods, it is the date of
the payment of duty which determines the rate of duty under
clause (c) of Section 15(1).
The proviso to Section 15(1) contemplates a situation where
a bill of entry has been presented before the date of the
entry inwards of the vessel or the arrival of the aircraft or
vehicle through which the goods are imported. Under the
proviso to Section 46(3), a bill of entry may be presented at
any time not exceeding thirty days prior to the expected
arrival of the aircraft or vehicle by which the goods have
been shipped for importation into India. Dealing with such a
situation, the proviso to Section 15(1) states that if a bill of
entry has been presented prior to the date of the entry
inwards of the vessel or the arrival of the aircraft or vehicle
by which the goods are imported, the bill of entry is deemed
to have been presented on the date of the entry inwards or
the arrival of the goods. Hence even where the bill of entry
has been presented before the date of the entry inwards or
the arrival of the aircraft or vehicle, the rate of duty is
determined with reference to the date of entry inwards or the
arrival of the aircraft or vehicle. This is a consequence of the
deeming fiction under the proviso, as a result of which the
presentation of the bill of entry, when filed prior to the arrival
of the goods, is deemed to be on the date of the entry
inwards or the arrival of the aircraft or vehicle. Hence, implicit
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in the provisions of Section 15(1) are the dual or (as counsel
before the court described them) the twin requirements of (i)
the presentation of the bill of entry; and (ii) the entry inwards
of the vessel or, as the case may be, the arrival of the
aircraft or vehicle.
19. Section 17 provides for the assessment of duty.
Section 46 provides for the entry of goods on importation.
Both the provisions of Section 17 and Section 46 have
undergone legislative changes by Act 8 of 2011 and by the
Finance Act of 2018. By Act 8 of 2011, Section 17 was
substituted and Section 46 was amended to provide for the
presentation in the electronic form of a bill of entry for home
consumption or warehousing. Section 46 provides as
follows;:
“46. Entry of goods on importation. – (1) The importer
of any goods, other than goods intended for transit or
transhipment, shall make entry thereof by presenting
[electronically] [on the customs automated system] to the
proper officer a bill of entry for home consumption or
warehousing in such form and manner as may be
prescribed;
Provided that the [Principal Commissioner of Customs or
Commissioner of Customs] may, in cases where it is not
feasible to make entry by presenting electronically on the
customs automated system, allow an entry to be presented
in any other manner :
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HC-KARProvided further that if the importer makes and subscribes to
a declaration before the proper officer, to the effect that he is
unable for want of full information to furnish all the particulars
of the goods required under this sub-section, the proper
officer may, pending the production of such information,
permit him, previous to the entry thereof (a) to examine the
goods in the presence of an officer of customs, or (b) to
deposit the goods in a public warehouse appointed under
Section 57 without warehousing the same.
(2) Save as otherwise permitted by the proper officer, a bill
of entry shall include all the goods mentioned in the bill of
lading or other receipt given by the carrier to the consignor.
(3) The importer shall present the bill of entry under sub-
section (1) before the end of the next day following the day
(excluding holidays) on which the aircraft or vessel or vehicle
carrying the goods arrives at a customs station at which such
goods are to be cleared for home consumption or
warehousing :
Provided that a bill of entry may be presented at any time not
exceeding thirty days prior to the expected arrival of the
aircraft or vessel or vehicle by which the goods have been
shipped for importation into India :
Provided further that where the bill of entry is not presented
within the time so specified and the proper officer is satisfied
that there was no sufficient cause for such delay, the
importer shall pay such charges for late presentation of the
bill of entry as may be prescribed.
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HC-KAR(4) The importer while presenting a bill of entry shall make
and subscribe to a declaration as to the truth of the contents
of such bill of entry and shall, in support of such declaration,
produce to the proper officer the invoice, if any, [and such
other documents relating to the imported goods as may be
prescribed],(4A) The importer who presents a bill of entry shall ensure
the following, namely :-
(a) the accuracy and completeness of the information
given therein;
(b) the authenticity and validity of any document
supporting it; and
(c) compliance with the restriction or prohibition, if any,
relating to the goods under this Act or under any other law
for the time being in force………”
(emphasis supplied)
Sub-section (1) of Section 46 requires an importer of goods
to make an entry by presenting a bill of entry for home
consumption or warehousing “electronically on the customs
automated system” to the proper officer “in such form and
manner as may be prescribed”. The word ‘electronically’ was
introduced by Act 8 of 2011 with effect from 8 April, 2011.
The provision for the presentation of the bill of entry on the
customs automated system and in ‘such form and manner as
prescribed’ was introduced by the Finance Act of 2018.
Under sub-section (3) of Section 46, a bill of entry under sub-
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section (1) must be presented before the end of the day
following the day on which the aircraft, vessel or vehicle
carrying the goods arrives at a customs station at which the
goods are to be cleared for home consumption or
warehousing (holidays being excluded). The first proviso to
sub-section (3) enables the presentation of a bill of entry
before arrival, at a time not exceeding thirty days prior to the
expected arrival of the aircraft, vessel or vehicle by which the
goods have been shipped for importation. Under the second
proviso if the bill of entry is not presented within the specified
time without sufficient cause, the importer is required to pay
the charges prescribed for late presentation of the bill of
entry.
20. Section 17 makes provisions for the assessment of
duty :
“Assessment of duty.
17. Assessment of duty. – (1) An importer entering any
imported goods under Section 46, or an exporter entering
any export goods under Section 50, shall, save as otherwise
provided in Section 85, self-assess the duty, if any, leviable
on such goods.
(2) The proper officer may verify [the entries made under
Section 46 or Section 50 and the self-assessment of goods
referred to in sub-section (1)] and for this purpose, examine
or test any imported goods or export goods or such part
thereof as may be necessary :
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HC-KARProvided that the selection of cases for verification shall
primarily be on the basis of risk evaluation through
appropriate selection criteria.
(3) For the purposes of verification under sub-section (2),
the proper officer may require the importer, exporter or any
other person to produce any document or information,
whereby the duty leviable on the imported goods or export
goods, as the case may be, can be ascertained and
thereupon, the importer, exporter or such other person shall
produce such document or furnish such information.
(4) Where it is found on verification, examination or testing
of the goods or otherwise that the self-assessment is not
done correctly, the proper officer may, without prejudice to
any other action which may be taken under this Act, re-
assess the duty leviable on such goods”
(5) Where any re-assessment done under sub-section (4)
is contrary to the self-assessment done by the importer or
exporter and in cases other than those where the importer or
exporter, as the case may be, confirms his acceptance of the
said re-assessment in writing, the proper officer shall pass a
speaking order on the re-assessment, within fifteen days
from the date of re-assessment of the bill of entry or the
shipping bill, as the case may be.
Explanation. – For the removal of doubts, it is hereby
declared that in cases where an importer has entered any
imported goods under section 46 or an exporter has entered
any export goods under section 50 before the date on which
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the Finance Bill, 2011 receives the assent of the President,
such imported goods or export goods shall continue to be
governed by the provisions of section 17 as it stood
immediately before the date on which such assent is
received.”
(emphasis supplied)
Prior to its substitution by Amending Act 8 of 2011, Section
17 contained requirements for (i) examination and testing of
goods; and (ii) assessment. Section 17, as it stood prior to
substitution, was in the following terms :
“17. Assessment of Duty. – (1) After an importer has
entered any imported goods under section 46 or an exporter
has entered any export goods under, section 50 the imported
goods or the export goods, as the case may be, or such part
thereof as may be necessary may, without undue delay, be
examined and tested by the proper officer.
(2) After such examination and testing, the duty, if any,
leviable on such goods shall, save as otherwise provided in
section 85, be assessed.
(3) For the purpose of assessing duty under sub-section
(2), the proper officer may require the importer, exporter or
any other person to produce any contract, broker’s note,
policy of insurance, catalogue or other document whereby
the duty leviable on the imported goods or export goods, as
the case may be, can be ascertained, and to furnish any
information required for such ascertainment which it is in his
power to produce or furnish, and thereupon the importer,
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exporter or such other person shall produce such document
and furnish such information.
(4) Notwithstanding anything contained in this section,
imported goods or export goods may, prior to the
examination or testing thereof, be permitted by the proper
officer to be assessed to duty on the basis of the statements
made in the enter relating thereto and the documents
produced and the information furnished under sub-section
(3); but if it is found subsequently on examination or testing
of the goods or otherwise that any statement in such entry or
document or any information so furnished is not true in
respect of any matter relevant to the assessment, the goods
may, without prejudice to any other action which may be
taken under this Act, be re-assessed to duty.
(5) Where any assessment done under sub-section (2) is
contrary to the claim of the importer or exporter regarding
valuation of goods, classification, exemption or concessions
of duty availed consequent to any notification therefore
under this Act, and in cases other than those where the
importer or exporter, as the case may be, confirms his
acceptance of the said assessment in writing, the proper
officer shall pass a speaking order within fifteen days from
the date of assessment of the bill of entry or the shipping bill,
as the case may be.”
The amendment of 2011 has made significant legislative
changes in the procedure and modalities for assessment of
duty under Section 17. Under sub-section (1) of Section 17,
the importer entering imported goods under Section 46, has
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to ‘self-assess’ duty (except as otherwise envisaged in the
provisions of Section 85). Under sub-section (2), the proper
officer may verify the entries made under Section 46 and the
self-assessment made under sub-section (1) and may
examine or test the goods. The selection of goods for
verification has to be primarily on the basis of risk evaluation
through appropriate selection criteria. Under sub-section (4),
where it is found on verification, examination or testing of
goods or otherwise that the self-assessment has not been
done properly the proper officer is entrusted with a power of
re-assessment. Sub-section (5) requires the passing of a
speaking order upon re-assessment.
21. Section 47 provides for the clearance of goods for
home consumption :
“Clearance of goods for home consumption. – (1)
Where the proper officer is satisfied that any goods entered
for home consumption are not prohibited goods and the
importer has paid the import duty, if any, assessed thereon
and any charges payable under this Act in respect of the
same, the proper officer may make an order permitting
clearance of the goods for home consumption :
Provided that such order may also be made electronically
through the customs automated system on the basis or risk
evaluation through appropriate selection criteria :
Provided further that the Central Government may, by
notification in the Official Gazette, permit certain class of
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HC-KARimporters to make deferred payment of said duty or any
charges in such manner as may be provided by rules.
(2) The importer shall pay the import duty –
(a) on the date of presentation of the bill of entry in the
case of self assessment; or
(b) within one day (excluding holidays) from the date on
which the bill of entry is returned to him by the proper officer for
payment of duty in the case of assessment, reassessment or
provisional assessment; or
(c) in the case of deferred payment under the proviso to
subsection (1), from such due date as may be specified by rules
made in this behalf,and if he fails to pay the duty within the time so specified, he
shall pay interest on the duty not paid or short-paid till the date
of its payment, at such rate, not less than ten per cent, but not
exceeding thirty-six per cent, per annum, as may be fixed by the
Central Government, by notification in the Official Gazette…..”
(emphasis supplied)
Sub-section (2) of Section 47 requires the importer to pay
import duty “on the date of presentation of the bill of entry in
the case of self-assessment”. Alternatively, where the bill of
entry is returned to the importer for the payment of duty in
the case of assessment, re-assessment or provisional
assessment, the import duty has to be paid within a day,
after excluding holidays.
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The provisions contained in Section 46 for the entry of goods
on importation and those in Section 17 for assessment form
part of a composite scheme. Section 46 requires an importer
of goods to make an entry in the electronic form of a bill of
entry for home consumption or, as the case may be, for
warehousing, on the customs automated system. An
exception is contained in the proviso to Section 46(1) for
cases where it is not feasible to make an entry in the
electronic form on the customs automated system. The bill of
entry under sub-section (1) has to be presented not later
than the day following the arrival of the goods though it can
be presented before the arrival of goods, at a time not
exceeding thirty days prior to their expected arrival. In
tandem with the provisions of Section 46, Section 17
provides for the self-assessment of duty by the importer.
Section 46(1) stipulates that the bill of entry has to be
presented in the form and in the manner ‘prescribed’. The
expression ‘prescribed’ is defined in Section 2(32) to mean
prescribed by regulations made under the Act. The Bill of
Entry (Electronic Integrated Declaration and Paperless
Processing) Regulations, 2018 have been made in
pursuance of the enabling power conferred by Sections 46
and 47 and Section 157 which contains a general power to
make regulations. Section 157(2)(a) was amended by the
Finance Act, 2018 (Act 13 of 2018) to allow for the power to
frame regulations on the form and manner of delivering or
presenting inter alia a bill of entry. Regulation 2(c) of the
2018 Regulations defines the expression bill of entry in the
following terms :
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accepted and a unique number generated and assigned to
that particular bill of entry by the Indian Customs Electronic
Data Interchange System, and includes its electronic records
or print-outs”
Regulation 2(d) defines the expression electronic integrated
declaration :
“(d) “electronic integrated declaration” means particulars
relating to the imported goods that are entered in the Indian
Customs Electronic Data Interchange System”
Under Regulation 2(e), “ICEGATE” is the customs
automated system of the Central Board of Indirect Taxes and
Customs. Regulation 3 requires the authorized person
[defined in Regulation 2(b)], which includes the importer, to
enter the electronic integrated declaration and supporting
documents by affixing a digital signature. Regulation 3 is as
follows :
“3. The authorised person shall enter the electronic
integrated declaration and the supporting documents himself
by affixing his digital signature and enter them on the
Customs Automated System and he may also get the
electronic integrated declaration made on the customs
automated system along with the supporting documents by
availing the services at the service centre.”
Regulation 4 provides as follows :
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before the end of the next day following the day (excluding
holidays) on which the aircraft or vessel or vehicle carrying
the goods arrives at a customs station at which such goods
are to be cleared for home consumption or warehousing.
(2) The bill of entry shall be deemed to have been filed and
self-assessment completed when after entry of the electronic
integrated declaration on the customs automated system or
by way of data entry through the service centre, a bill of entry
number is generated by the Indian Customs Electronic Data
Interchange System for the said declaration and the self-
assessed copy of the Bill of Entry may be electronically
transmitted to the authorised person or printed out at the
service centre.
(3) Where the bill of entry is not filed within the time
specified in sub-regulation (1) and the proper officer of
Customs is satisfied that there was no sufficient cause for
such delay, the importer shall be liable to pay charges for
late presentation of the bill of entry at the rate of…………….”
(emphasis supplied)
22. The Regulations of 2018 have made provisions for
submission of a declaration and generation of the bill of entry
in an electronic form on the automated platform provided by
the Central Board of Indirect Taxes and Customs. Sub-
regulation (2) of Regulation 4 embodies a legal fiction.
Regulation 4(2) stipulates that the bill of entry is deemed to
have been filed and self-assessment completed when after
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the entry of the electronic integrated declaration on the
customs automated system (or by data entry through a
service centre) a bill of entry number is generated by the
Indian Customs Electronic Data Interchange (“EDI”) System.
The self-assessed copy of the bill of entry may be
electronically transmitted to the authorized person under the
deeming fiction which is created by Regulation 4(2). Hence,
the bill of entry is deemed to be filed and the self-
assessment completed when the requirements of Regulation
4(2) are fulfilled namely by the (i) entry of the declaration on
the customs automated system; and (ii) generation of a bill of
entry number by the EDI system. Following this, the self-
assessed copy of the bill of entry is electronically transmitted
to the authorized person.
23. In terms of the provisions of Section 15(1)(a), in the
case of goods which are entered for home consumption
under Section 46, the date of presentation of the bill of entry
determines the rate of duty and tariff valuation. Under
Section 47(2)(a), the importer is obliged to pay the import
duty on the date of the presentation of the bill of entry in the
case of self-assessment. Regulation 4(2) of the Regulations
of 2018 categorically stipulates when the presentation of the
bill of entry is complete. Once the bill of entry is deemed to
have been presented in terms of Regulation 4(2) the rate
and valuation in force stand crystalized under Section
15(1)(a). Section 17(4) confers a power of re-assessment on
the proper officer where it is found on verification,
examination or testing of the goods or otherwise- that the
self-assessment has not been done correctly. In the present
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case the customs authorities sought to exercise the power of
re-assessment on the ground of the subsequent notification
enhancing the rate of duty. The fact of the matter is that self-
assessment was carried out on the basis of the rate of duty
which prevailed at the time of the presentation of the bill of
entry. This is not and cannot be a matter of dispute.
Notification No. 5/2019, which introduced a new Tariff Entry –
9806 00 00 – in the First schedule to the Customs Tariff Act
covering all goods originating in or exported from the Islamic
Republic of Pakistan, was not in force at the time when the
self-assessment was carried out.
24. Under Section 15(1)(a) the rate of duty is the rate in
force on the date of the presentation of a bill of entry where
the goods are entered for home consumption under Section
46. The submission of the Learned ASG is that the
expression “on the date” is adopted by the legislature in
clauses (a) and (b) and in the proviso to Section 15(1). He
urged that Section 15(1) has no reference to time but only to
the date of the presentation of the bill of entry and once a
notification was issued on 16 February, 2019 enhancing the
rate of duty, that is the duty ‘in force’ on the date of
presentation. Section 15(1)(a) uses two expressions (i) the
rate and valuation “in force”; and (ii) “on the date” of the
presentation of the bill of entry for home consumption under
Section 46. The provisions of Section 15(1)(a) have to be
read in conjunction with the provisions of Section 46 which
are referred to in the former provision. Section 46 has
incorporated a regime which encompasses the submission
of the bill of entry for home consumption or warehousing in
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an electronic format, on the customs automated system in
the manner which is prescribed. The Regulations of 2018
stipulate the manner in which the bill of entry has to be
presented. The deeming fiction in Regulation 4(2) specifies
when presentation of the bill of entry and ‘self- assessment’
are complete. The rate of duty stands crystallized under
Section 15(l)(a) once the deeming fiction under Regulation
4(2) comes into existence. The regulations have to be read
together with the statutory provisions contained in Section
15(l)(a) and Section 46, while determining the rate of duty.
G. Precedent
25. At this stage it is necessary to analyze the precedent
on the subject. In Bharat Surfactants (Private)
Limited v. Union of India [(1989) 4 SCC 21 = 1989 (43)
E.L.T. 189 (S.C.)] (“Bharat Surfactants”), customs duty was
imposed on the import of edible oil by the petitioners at the
rate of 150 per cent on the basis that the import was made
on the date of the inward entry, which was 31 July, 1981.
The vessel arrived and registered in the Port of Bombay on
11 July, 1981 but since a berth was not available, the cargo
could not be unloaded. The vessel left Bombay and
proceeded to Karachi and returned towards the end of July,
1981. The rate of customs duty prevailing on 11 July, 1981
was 12.5 per cent and the contention of the importer was
that but for the fact that the vessel was unable to secure a
berth, it would have delivered the cargo. Speaking for a
Constitution Bench, Chief Justice R.S. Pathak rejected the
contention of the importer that the import of goods must be
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deemed to have taken place on 11 July, 1981 when the ship
originally arrived in Bombay port and registered itself. The
Constitution Bench held :
“14…The provisions of Section 15 are clear in themselves.
The date on which a Bill of Entry is presented under Section
46 is, in the case of goods entered for home consumption,
the date relevant for determining the rate of duty and tariff
valuation. Where the Bill of Entry is presented before the
date of Entry Inwards of the vessel, the Bill of Entry is
deemed to have been presented on the date of such Entry
Inwards.”
The Constitution Bench held that the date of entry inwards of
the vessel in the Customs’ register was mentioned as 31
July, 1981 and the rate of import duty and tariff valuation
would be that which was in force on that day. The decision
in Bharat Surfactants was adverted to in the decision of this
court in Priyanka Overseas Pvt. Ltd. v. Union of India [1991
Supp (1) SCC 102 = 1991 (51) E.L.T. 185 (S.C.)]. Justice
N.M. Kasliwal, speaking for the two judge Bench, observed :
“34…The rate of duty and tariff valuation on the imported
goods may be changed from time to time and as such the
legislature has clearly expressed its intention under Section
15 as to on what date the rate of duty and tariff valuation is
to be determined…
Many contingencies may happen in between the filing of bill
of entry and actual removal of the goods from the warehouse
for which sometimes the importer of goods may himself be
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customs authorities and there may also be contingencies
beyond the control of both the parties. In any case the
intention of the legislature being clear, rate of duty is to be
applied, as may be in force on the date of actual removal of
goods from the warehouse under Section 15(l)(b) of the
Customs Act.”
The above observations, referring to the date of the actual
removal of goods from the warehouse, were made in the
context of the provisions of Section 15(l)(b). In a subsequent
decision in Dhiraj Lal H. Vohra v. Union of India [1993 Supp
(3) SCC 453 = 1993 (66) E.L.T. 551 (S.C.)], Justice K.
Ramaswamy speaking for a three judge Bench observed :
“3. It is clear from a bare reading of these relevant
provisions that the due date to calculate the rate of duty
applicable to any imported goods shall be the rate and
valuation in force, in the case of the goods entered for home
consumption under Section 46, is the date on which the bill
of entry in respect of such goods is presented under that
section and in the case of goods cleared from a warehouse
under Section 68, the date on which the goods are actually
removed from the warehouse. By operation of the proviso if
a bill of entry has been presented before the date of entry
inwards the bill of entry shall be deemed to have been
presented “on the date of such entry inwards” but would be
subject to the operation of Sections 46 and 31(1) of the Act.”
In that case the ship had arrived at the Port of Madras on 20
February, 1989 and was ready to discharge her cargo.
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Though the import manifest was delivered, the cargo could
not be handled as a result of a continuous strike. The bill of
entry for clearance of goods for home consumption was
presented on 27 February, 1989. The ship arrived into the
port and was berthed on 2 March, 1989 on which date the
entry inwards was granted. From 1 March, 1989, the rate of
duty was increased. The court rejected the contention that
since the vessel had entered Indian territorial waters on 20
February, 1989 when she was ready to discharge the cargo,
the rate of duty must be that which prevailed on that date :
“3…The contention, therefore that the ship entered Indian
territorial waters on February 20, 1989 and was ready to
discharge the cargo is not relevant for the purpose of Section
15(1) read with Sections 46 and 31 of the Act. The prior
entries regarding presentation of the bill of entry for
clearance of the goods on February 27, 1989 and their
receipt in the appraising section on February 28, 1989 also
are irrelevant. The relevant date to fix the rate of customs
duty, therefore, is March 2, 1989. The rate which prevailed
as on that date would be the duty to which the goods
imported are liable to the impost and the goods would be
cleared on its payment in accordance with the rate of levy of
customs prevailing as on March 2, 1989.”
Another decision of a Bench comprising three Learned
Judges of this Court in D.C.M. v. Union of India [1995 Supp
(3) SCC 223 = 1999 (109) E.L.T. 12 (S.C.)] held as follows :
“7…A reading of Sections 15, 46 and 68 makes it clear that
they provide an option to the importer either to file a bill of
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HC-KARentry for home consumption straight away (in which case he
has to pay the duty determined with reference to that date)
or to file a bill of entry for warehousing. In the latter case, the
goods are merely warehoused. The import duty will be levied
at the rate and on the basis of the valuation determined in
accordance with the provisions prevailing on the date of
clearance from the warehouse for which purpose the
importer has to file a fresh bill of entry for home
consumption. In other words, it is the date of filing the bill of
entry for home consumption which determines the rate of
duty in clauses (a) and (b) of Section 15. Inasmuch as the
matter is left to the option of the importer and also because a
uniform principle is adopted by the Act, as explained above,
we see no room for any legitimate grievance of
discrimination. There is also no presumption that rate of duty
always goes up. It may also go down, in which case, the
importer stands to gain.”
26. The presentation of a bill of entry for home
consumption under Section 46 is hence the definitive event
with reference to which the customs’ duty payable for import
is determined. The duty in force on the day when the bill of
entry for home consumption is presented is the duty which is
applicable under Section 15(1)(a). It is in view of this
principle that the entry of the vessel into territorial waters,
before the presentation of the bill of entry, has been held not
to fix the rate of duty where the rate of duty has undergone a
change.
H. Interpreting 'day' and 'date'
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27. The expressions “day” and “date” have been construed
in varying contexts in the precedents of this Court. The
underlying feature of the decisions is that the content of
those expressions is based on the context. In Raj Kumar
Yadav v. Samir Kumar Mahaseth [(2005) 3 SCC 601], the
limitation provided by Section 81 of the Representation of the
People Act, 1951 expired on the 45th day from the date of
the election. Interpreting the provision, Chief Justice R.C.
Lahoti while speaking for a three judge Bench of this Court
observed :
“6…The word “day” is not defined in the Act. It shall have to
be assigned its ordinary meaning as understood in law. The
word “day” as per English calendar begins at midnight and
covers a period of 24 hours thereafter, in the absence of
there being anything to the contrary in the context.”
Hence, in that case the Election Petition could have been
presented up to midnight falling between 27 and 28 August,
2003. The Court observed that the limitation which was
prescribed by the statute could not be curtailed or taken
away by the rules of the High Court, governing its procedure.
28. In New India Assurance Co. Ltd. v. Ram Dayal [(1990)
2 SCC 680] (“Ram Dayal”), a two judge Bench of this Court
noted that the insurance policy in respect of the vehicle was
up to 31 August, 1984 and could be renewed. Instead of
renewing the policy, a fresh insurance policy was taken from
28 September, 1984, on which date the accident occurred.
This Court upheld the view of the Punjab and Haryana High
Court, which was supported by earlier decisions of the
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Madras High Court, Punjab and Haryana High Court and the
Allahabad High Court, that the insurance cover commenced
from the beginning of the day and concluded that :
“4… when a policy is taken on a particular date, its
effectiveness is from the commencement of the date and,
therefore, the High Court, in our opinion, was right in holding
that the insurer was liable in terms of the Act to meet the
liability of the owner under the award.”
29. On the other hand, in National Insurance Company
Limited v. Geeta Devi [(2010) 15 SCC 670], the cover note
was issued on 9 June, 1989 at 4:40 pm while the accident
took place at 11:30 am on the same day. A two judge Bench
of this Court distinguished the decision in Ram Dayal (supra)
and held that when the cover note mentioned the date of
issue of the policy as 9 June, 1989 and the time as 4:40 pm “
it necessarily means that the effective date of issue and time
of issue is as mentioned on the cover note.” Since the cover
note mentioned both the date and time, the Court held that
the principle that the insurance cover would date back to
midnight of the preceding day would not cover the factual
situation.
30. In Ahmadsahab Abdul Mulla (2) Dead by proposed
Lrs. v. Bibijan [(2009) 5 SCC 462], the issue before this
Court was whether the expression “date” in Article 54 of the
Schedule to the Limitation Act (which prescribes the period
of limitation for a suit for specific performance) is suggestive
of a specific date in the calendar. The court observed :
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HC-KAR“11. The inevitable conclusion is that the expression “date
fixed for the performance” is a crystallised notion. This is
clear from the fact that the second part “time from which
period begins to run” refers to a case where no such date is
fixed. To put it differently, when date is fixed it means that
there is a definite date fixed for doing a particular act. Even
in the second part the stress is on “when the plaintiff has
notice that performance is refused”. Here again, there is a
definite point of time, when the plaintiff notices the refusal. In
that sense both the parts refer to definite dates. So, there is
no question of finding out an intention from other
circumstances.”
31. The expression ‘date’ in Article 54 was held to be
suggestive of a specified date in the calendar. In Pashupati
Nath Singh v. Harihar Prasad Singh [(1968) 2 SCR 812], a
three judge Bench construed the words “on the date fixed for
scrutiny” in Section 36(2)(a) of the Representation of the
People Act, 1951. Interpreting those words, the Court held
that the qualification of a candidate must exist from the
earliest moment of the day of scrutiny :
“13. It seems to us that the expression “on the date fixed
for scrutiny” in Section 36(2)(a) means “on the whole of the
day on which the scrutiny of nomination has to take place”.
In other words, the qualification must exist from the earliest
moment of the day of scrutiny. It will be noticed that on this
date the Returning Officer has to decide the objections and
the objections have to be made by the other candidates after
examining the nomination papers and in the light of Section
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36(2) of the Act and other provisions. On the date of the
scrutiny the other candidates should be in a position to raise
all possible objections before the scrutiny of a particular
nomination paper starts.”
32. A Special Bench of the Madras High Court in Re :
Court Fees [ILR (1923) 46 Mad 685] dealt with the
interesting issue of whether the law disregards fractions of
the day. A notification was published in the Fort St. George
Gazette on 5 May, 1922 by which the table of fees leviable in
respect of the institution of suits under Appendix-II of the old
rules on the Original side was amended. Instead of a fixed
fee of Rs. 30, it was provided that Rs. 150 was to be levied
in all suits where the value of the subject matter did not
exceed Rs. 10,000/- and in respect of suits of a higher value,
Rs. 20/- was to be levied for every Rs. 5,000/- or part thereof
in excess of Rs. 10,000/-. The notification stated that “the
amendments do come into force from the date of publication
in the Fort St. George Gazette”. The office hours of the High
Court were from 11am to 5pm. The notification reached the
High Court at about 5 pm, at the close of the office hours.
The issue before the Special Bench was whether the rules
imposing increased institution fees on suits on the Original
side of the High Court would apply the new scale to suits
which had already been instituted on that day. Chief Justice
Schwabe, on behalf of the majority, held “that the hour of the
day at which the Gazette was actually published is a wholly
irrelevant consideration”. The Chief Justice noted that the
use of the expression ‘from’ may have one of two meanings
namely on and after, that is including the named date, or
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HC-KARmerely after, that is excluding the named date. The Chief
Justice took the view that it is necessary to look at the
context and the circumstances of each case to arrive at the
true construction. Having said this, the Chief Justice outlined
the principles in the following extract on page 688 :
“(1) that, if the named date is the beginning of a defined
limited period, that, where there is a terminus ad quem as
well as a terminus a quo, then prima facie the first day is
excluded; (2) that, if the named date is the beginning of an
indefinite period then prima facie the first day is included. I
say prima facie because in my view there must be
exceptions”.
In his view, the expression “from a named date” meant “on
and after that day”. Hence the date on which the notification
was published in the official Gazette was held to apply to all
plaints which were filed on 5 May, 1922.
Justice Coutts Trotter, arrived at the same conclusion as the
Chief Justice, following a different path, which he set out in
the following observations, on page 691 :
“What I conceive to emerge from the decided cases is this :
that as the law in general neglects fractions of a day you
must either exclude or include the whole of the day with
which a given statute or rule or regulation deals. And the
exclusion or inclusion, I think, is clearly provided in two other
rules. If you are fixing the point of time at which a certain
state of things is to be called into existence, that state of
things comes into existence at midnight of the day preceding
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which the new state of things begins. In such cases the
statue or rule is only concerned in fixing the terminus
a quo of a new state of law which is enacted to continue
indefinitely, in other words, until repealed by a new
enactment of the legislature where, in short, you have a
terminus a quo but no terminus ad quem.”
In his view, on page 693 :
“Where a statute fixes only the terminus a quo of a state of
things, which is envisaged as to last indefinitely, the common
law rule obtains that you ought to neglect fractions of a day
and the statute or regulation or order takes effect from the
first moment of the day on which it is enacted or passed, that
is to say, from midnight of the day preceding the day on
which it is promulgated: where on the other hand, a statute
delimits a period marked both by a terminus a quo and a
terminus ad quem, the former is to be excluded and the latter
to be included in the reckoning.”
The notification, in this view, fell in the former class and was
held to have come into force on the first second of the 5
May, that is to say from midnight of 4 May. Hence all plaints
which were filed on 5 May were liable to the enhanced fee.
The tightly reasoned and eloquent dissenting opinion
delivered by Justice Kumaraswami Sastri, on the other hand,
deserves close attention. The Learned Judge noted that if
the case were to be decided on the principle that the law
disregards fractions of a day, it could mean any one of two
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things : either that a fraction of a day is to be taken as a
whole day or that it is to be excluded altogether from the
calculation. Consequently, “it does not help us to determine
in any particular case whether the part is to be left out or
kept in”. Justice Kumaraswami Sastri observed that there is
no invariable rule that the use of the expression ‘from’
includes the first day. Nor was there any basis in principle in
the submission of the Crown that the exclusion of the first
day where the word “from” is used is only to be in case
where there are two termini. The Learned Judge held that
rules of equity and good conscience are by the Civil Courts
Act to govern cases not governed by the Hindu and
Mohammedan Laws. Voicing a powerful dissent, Justice
Kumaraswami Sastri observed, on page 704 :
“I do not think that the principles which govern, or the
devices which are resorted to, by the Executive for the
purpose of raising money by taxation ought to have any
weight with us in determining whether the date of publication
is to be included or excluded. I do not think the High Court is
part of the tax gathering machinery of the Government or
has any concern with the consequences to the Government
of their decision on the construction of the rule. The rule, I
take it, was passed by the Judges of the High Court in the
exercise of the powers entrusted to them to control the
administration of justice and the fees were raised because in
the opinion of the Judges it was just and proper that litigants
ought to pay more for the benefits which they derive by
resorting to the jurisdiction of the High Court”.
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In the view of the Learned Judge, the notification having
been received in the Registry of the High Court at 5 pm at
the office closing hour, litigants who had filed plaints before
either or they or the office had knowledge of the publication
“did what was perfectly valid under the old rules and they
presented the plaints with Rs. 30 stamp irrespective of the
value of their claim”. Looking at it from the citizens’
perspective, the Learned Judge observed, on page 704 :
“A person who files a plaint which is properly stamped and
which is in order at the time of presentation is entitled to
have his plaint admitted on presentation though as a matter
of convenience the office receives the plaints and admits
them at the end of the day or later on. There seems to me to
be very little justice or equity in directing that persons who
have done what was perfectly a legal and valid act at the
time should pay a Court-fee which is much higher simply
because a notification was received at the close of the day
making the higher fees chargeable from the date of the
notification. It may well be that if those persons had notice
that instead of Rs. 30 they had to pay at least Rs. 150 and a
maximum that would range according to the value of their
claim, they might rather have compromised with the other
side or might have had resort to other proceedings like
arbitration for settling their claims. I can find nothing to justify
charging people, who filed their plaints on that day without
knowledge of the notification which only reached the High
Court at 5 p.m., with the higher fees in respect of plaints filed
during the course of the day”.
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33. Mr. Natraj, on behalf of the Union, submitted that
Parliament has employed the phrase “on the date” without
making a reference to time. Hence, he submitted that
irrespective of the time of the publication or uploading of the
notification under the Customs Tariff Act in the e-Gazette,
the legislature has by a legal fiction, enacted that the rate of
duty on imported goods will be the rate that is prevalent on
the date of the presentation of the bill of entry for home
consumption. He submitted that two different rates of duty
cannot be applicable on the same day. Hence, according to
the submission, once a notification is issued under the
Customs Tariff Act, it will be a notification in force on that
date and apply with effect from the commencement of that
date.
34. The decisions to which a reference has been made
earlier, have construed the expression “day” or, as the case
may be, “date” in varying contexts ranging from the law
governing elections, insurance and limitation. A general
position in law has not been laid down that is divorced from
subject, context and statute. In interpreting the statute, the
court is guided by the terms of its provisions, the purpose
underlying their adoption and the scheme which emerges
from interrelated provisions and the nature of the provision.
The court in the present case is interpreting the terms of a
fiscal levy. The court here has to construe the scheme and
provisions of the Customs Act and their relationship with the
provisions of the Customs Tariff Act. The provision which
falls for construction is Section 15(1) of which both clauses
(a) and (b) use the expression “on the date”. In clause (a),
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the rate of duty and valuation is the rate and valuation in
force on the date on which a bill of entry is presented under
Section 46 where goods are entered for home consumption.
Under Clause (b), where goods are cleared from a
warehouse under Section 68 it is the date on which a bill of
entry for home consumption is presented under that Section
which is determinative of the rate and valuation.
35. Mr. Natraj is textually right when he emphasizes that
Section 15(1) contains a reference to date and not time. But
there are two responses to his line of approaching the
issue. First, the legislature does not always say everything
on the subject. When it enacts a law, every conceivable
eventuality which may arise in the future may not be present
to the mind of the lawmaker. Legislative silences create
spaces for creativity. Between interstices of legislative
spaces and silences, the law is shaped by the robust
application of common sense. Second, regulatory
governance is evolving in India as new technology replaces
old and outmoded ways of functioning. The virtual world of
electronic filings was not on the horizon when Parliament
enacted the Customs Act in 1962. Yet the Parliament has
responded to the rapid changes which have been brought
about by the adoption of technology in governance. In the
provisions of Section 17 and Section 46, the impact of ICT-
based governance has been recognized by the legislature in
providing for the presentation of bills of entry in the electronic
form on the customs automated EDI system. Precision,
transparency and seamless administration are key features
of a system which adopts technology in pursuit of efficiency.
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As we will explore in greater detail later in this judgment,
technology has enabled both administrators and citizens to
know precisely when an electronic record is uploaded. The
considerations which Parliament had in its view in providing
for crucial amendments to the statutory scheme by moving
from manual to electronic forms of governance in the
assessment of duties must not be ignored. Tax
administration must leave behind the culture of an age in
which the assessment of duty was wrought with delays,
discretion, doubt and sometimes, the dubious. The
interpretation of the court must aid in establishing a system
which ensures certainty for citizens, ease of application and
efficiency of administration.
36. It is with these principles of interpretation in mind that
we must evaluate the submission which was urged by Mr.
Nataraj, on behalf of the Union, that upon the issuance of a
notification enhancing the rate of duty under Section 8A of
the Customs Tariff Act, the date on which the notification
was issued will govern the rate applicable to all bills of entry,
including those which were presented before the enhanced
rate was notified. The submission cannot be accepted for
several reasons. For one thing, it misses the significance of
the expression “in force’ which has been employed in the
prefatory part of Section 15(1). A notification under Section
8A(1) of the Customs Tariff Act, even though it has the effect
of amending the First Schedule, takes effect prospectively.
Section 8A does not confer upon the notification an
operation anterior to its making. In the language of the law,
its operation is prospective. To accept the submission of the
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ASG would mean that the notification under Section 8A
would have effect prior to its making, something which
Parliament has not incorporated by language or intent. If, as
we hold, the notification operates for the future beginning
with the point of its adoption, it cannot operate to displace
the rate of duty which is applicable when a bill of entry is
presented for home consumption under Section 46.
The submission of the Union cannot be accepted in view of
the provisions contained in Section 46 for the presentation of
a bill of entry for home consumption in an electronic form on
the customs automated system. While making that provision,
specifically by means of an amendment by Act 8 of 2011 and
later by the Finance Act of 2018, Parliament used the
expression “in such form and manner as may be prescribed.”
Regulation 4(2) of the Regulations of 2018 provides when
the bill of entry shall be deemed to have been filed and self-
assessment completed. The legal fiction which has been
embodied in Regulation 4(2) emanates from the enabling
provisions of Section 46. The provisions of Sections 15(1)(a),
17, 46(1) and 47(2)(a) constitute one composite scheme. As
a result of the modalities prescribed for the electronic
presentation of the bill of entry and self-assessment after the
entry of the electronic declaration on the customs automated
system, a bill of entry number is generated by the EDI
system for the declaration. Regulation 4(2) provides for a
deeming fiction in regard to the filing of the bill of entry and
the completion of self-assessment. In the context of these
specific provisions, it would do violence to the overall
scheme of the statute to interpret the language of Section
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15(1)(a) in the manner in which it is sought to be interpreted
by the ASG. The submission of the ASG, simply put, is that
because Notification No. 5/2019 was issued on 16 February,
2019, the court must regardless of the time at which it was
uploaded on the e-Gazette treat it as being in existence with
effect from midnight or 0000 hours on 16 February, 2019.
The consequence of this interpretation would be to do
violence to the language of Section 8A(1) of the Customs
Tariff Act, and to disregard the meaning, intent and purpose
underlying the adoption of provisions in the Customs Act in
regard to the electronic filing of the bill of entry and the
completion of self-assessment.”
18.1 In the instant case, the material on record clearly
establishes that as held by the Apex Court in the aforesaid
judgment, the date for fixing the rate and tariff valuation is the date
when the BOE was presented which is 06.09.2024 and the
subsequent DGFT notifications issued on 02.04.2025 and
15.10.2025 would therefore not be applicable to the facts of the
instant case and consequently, in the light of the judgment of the
Apex Court supra, no reliance can be placed upon the said
notifications which purport to prohibit the import of roasted areca
nuts below a particular value by the respondents whose contention
in this regard also cannot be accepted.
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18.2 Insofar as the question/issue of valuation is concerned,
learned Senior Counsel for the petitioner is also correct in his
submission that this aspect is covered by the provisions contained
in Section 14 of the Customs At as held by the Apex Court in the
case of Century Metal Recycling India Pvt.Ltd vs UOI – 2019
(367) ELT 3, wherein it was held as under:
” 6. We would begin by reproducing Section 14 of the Act
and Rules 3 and 12 of the Customs Valuation (Determination
of Value of Imported Goods) Rules, 2007 (‘the 2007 Rules’,
for short) which read as under :
“Section 14 : Valuation of Goods.
(1) For the purposes of the Customs Tariff Act, 1975 (51 of
1975), or any other law for the time being in force, the value
of the imported goods and export goods shall be the
transaction value of such goods, that is to say, the price
actually paid or payable for the goods when sold for export to
India for delivery at the time and place of importation, or as
the case may be, for export from India for delivery at the time
and place of exportation, where the buyer and seller of the
goods are not related and price is the sole consideration for
the sale subject to such other conditions as may be specified
in the rules made in this behalf :
Provided that such transaction value in the case of imported
goods shall include, in addition to the price as aforesaid, any
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commissions and brokerage, engineering, design work,
royalties and licence fees, costs of transportation to the place
of importation, insurance, loading, unloading and handling
charges to the extent and in the manner specified in the rules
made in this behalf :
Provided further that the rules made in this behalf may
provide for, —
(i) the circumstances in which the buyer and the seller
shall be deemed to be related;
(ii) the manner of determination of value in respect of
goods when there is no sale, or the buyer and the seller are
related, or price is not the sole consideration for the sale or in
any other case;
(iii) the manner of acceptance or rejection of value declared
by the importer or exporter, as the case may be, where the
proper officer has reason to doubt the truth or accuracy of
such value, and determination of value for the purposes of
this section :
Provided also that such price shall be calculated with
reference to the rate of exchange as in force on the date on
which a bill of entry is presented under section 46, or a
shipping bill of export, as the case may be, is presented
under section 50.
(2) Notwithstanding anything contained in sub-section (1), if
the Board is satisfied that it is necessary or expedient so to
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do, it may, by notification in the Official Gazette, fix tariff
values for any class of imported goods or export goods,
having regard to the trend of value of such or like goods, and
where any such tariff values are fixed, the duty shall be
chargeable with reference to such tariff value.
Explanation. — For the purposes of this section —
(a) “rate of exchange” means the rate of exchange —
(i) determined by the Board, or
(ii) ascertained in such manner as the Board may direct, for
the conversion of Indian currency into foreign currency or
foreign currency into Indian currency;
(b) “foreign currency” and “Indian currency” have the
meanings respectively assigned to them in clause (m) and
clause (q) of section 2 of the Foreign Exchange Management
Act, 1999 (42 of 1999).
xx xx xx
Rules
Rule 3. Determination of the method valuation :
(1) Subject to Rule 12, the value of imported goods shall be
the transaction value adjusted in accordance with provisions
of Rule 10;
(2) Value of imported goods under sub-rule (1) shall be
accepted :
Provided that –
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(a) there are no restrictions as to the disposition or use of
the goods by the buyer other than restrictions which –
(i) are imposed or required by law or by the public
authorities in India; or
(ii) limit the geographical area in which the goods may be
resold; or
(iii) do not substantially affect the value of the goods;
(b) the sale or price is not subject to some condition or
consideration for which a value cannot be determined in
respect of the goods being valued;
(c) no part of the proceeds of any subsequent resale,
disposal or use of the goods by the buyer will accrue directly
or indirectly to the seller, unless an appropriate adjustment
can be made in accordance with the provisions of Rule 10 of
these rules; and
(d) the buyer and seller are not related, or where the buyer
and seller are related, that transaction value is acceptable for
customs purposes under the provisions of sub-rule (3) below.
(3) (a) Where the buyer and seller are related, the
transaction value shall be accepted provided that the
examination of the circumstances of the sale of the imported
goods indicate that the relationship did not influence the
price.
(b) In a sale between related persons, the transaction value
shall be accepted, whenever the importer demonstrates that
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the declared value of the goods being valued, closely
approximates to one of the following values ascertained at or
about the same time.
(i) the transaction value of identical goods, or of similar
goods, in sales to unrelated buyers in India;
(ii) the deductive value for identical goods or similar goods;
(iii) the computed value for identical goods or similar goods
:
Provided that in applying the values used for comparison,
due account shall be taken of demonstrated difference in
commercial levels, quantity levels, adjustments in
accordance with the provisions of Rule 10 and cost incurred
by the seller in sales in which he and the buyer are not
related;
(c) substitute values shall not be established under the
provisions of clause (b) of this sub-rule.
(4) if the value cannot be determined under the provisions
of sub-rule (1), the value shall be determined by proceeding
sequentially through Rule 4 to 9.
xx xx xx
Rule 12. Rejection of declared value :
(1) When the proper officer has reason to doubt the truth or
accuracy of the value declared in relation to any imported
goods, he may ask the importer of such goods to furnish
further information including documents or other evidence
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and if, after receiving such further information, or in the
absence of a response of such importer, the proper officer
still has reasonable doubt about the truth or accuracy of the
value so declared, it shall be deemed that the transaction
value of such imported goods cannot be determined under
the provisions of sub-rule (1) of Rule 3.
(2) At the request of an importer, the proper officer, shall
intimate the importer in writing the grounds for doubting the
truth or accuracy of the value declared in relation to goods
imported by such importer and provide a reasonable
opportunity of being heard, before taking a final decision
under sub-rule (1).
Explanation. – (1) For the removal of doubts, it is hereby
declared that : –
(i) This rule by itself does not provide a method for
determination of value, it provides a mechanism and
procedure for rejection of declared value in cases where
there is reasonable doubt that the declared value does not
represent the transaction value; where the declared value is
rejected, the value shall be determined by proceeding
sequentially in accordance with Rules 4 to 9.
(ii) The declared value shall be accepted where the proper
officer is satisfied about the truth and accuracy of the
declared value after the said enquiry in consultation with the
importers.
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(iii) The proper officer shall have the powers to raise doubts
on the truth or accuracy of the declared value based on
certain reasons which may include –
(a) the significantly higher value at which identical or
similar goods imported at or about the same time in
comparable quantities in a comparable commercial
transaction were assessed;
(b) the sale involves an abnormal discount or abnormal
reduction from the ordinary competitive price;
(c) the sale involves special discounts limited to exclusive
agents;
(d) the misdeclaration of goods in parameters such as
description, quality, quantity, country of origin, year of
manufacture or production;
(e) the non-declaration of parameters such as brand,
grade, specifications that have relevance to value;
(f) the fraudulent or manipulated documents.”
7. Section 14 has to be read with Rule 12 of the 2007
Rules. Rule 12 uses the expression ‘the proper officer has
reason to doubt the truth or accuracy of the value declared in
relation to the imported goods’. This expression is distinctly
different from the words and preconditions imposed for
rejecting the declared transactional value under the repealed
Customs Valuation (Determination of Price of Imported
Goods) Rules, 1988 (‘the 1988 Rules’, for short) and the pre-
amended Section 14(1) of the Act which were considered
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and interpreted by this Court in Eicher Tractors Limited,
Haryana v. Commissioner of Customs, Mumbai [(2001) 1
SCC 315 = 2000 (122) E.L.T. 321 (S.C.)]. In fact, the
judgment in Eicher Tractors Limited (supra) had not
considered Rule 10-A of the 1988 Rules enforced with effect
from 19th February, 1998 as the imports therein related to
the year 1993. Rule 10A brought the concept of ‘reason to
doubt the declared value’ in place of special or extraordinary
circumstances particularised in Rule 4(2) of the 1988 Rules.
However, the interpretation given to Section 14(1) in Eicher
Tractors Limited (supra) as to the meaning of the
word ‘payable’ used therein would be still applicable. The
word ‘payable’ used in Section 14(1) refers to the particular
transaction and the payability in respect of ‘the transaction’. It
refers to the notional value, albeit the transaction value as
declared in the bill of entry plus the amount which has to be
added in terms of Rule 10 of the 2007 Rules.
8. This Court in M/s. Sanjivani Non-Ferrous Trading Pvt.
Ltd. (supra), while interpreting the provisions of Section 14
and Rules 3, 4 and 12 of the 2007 Rules, had held as under :
“10. The law, thus is clear. As per Sections 14(1) and 14(1-
A), the value of any goods chargeable to ad valorem duty is
deemed to be the price as referred to in that provision.
Section 14(1) is a deeming provision as it talks of ‘deemed
value’ of such goods. Therefore, normally, the Assessing
Officer is supposed to act on the basis of price which is
actually paid and treat the same as assessable
value/transaction value of the goods. This, ordinarily, is the
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course of action which needs to be followed by the
Assessing Officer. This principle of arriving at transaction
value to be the assessable value applies. This is also the
effect of Rule 3(1) and Rule 4(1) of the Customs Valuation
Rules, namely, the adjudicating authority is bound to accept
price actually paid or payable for goods as the transaction
value. Exceptions are, however, carved out and enumerated
in Rule 4(2). As per that provision, the transaction value
mentioned in the Bills of Entry can be discarded in case it is
found that there are any imports of identical goods or similar
goods at a higher price at around the same time or if the
buyers and sellers are related to each other. In order to
invoke such a provision it is incumbent upon the Assessing
Officer to give reasons as to why the transaction value
declared in the Bills of Entry was being rejected; to establish
that the price is not the sole consideration; and to give the
reasons supported by material on the basis of which
Assessing Officer arrives at his own assessable value.”
The Division Bench has quoted the following sub-para
from Commissioner of Customs, Calcutta v. South India
Television (P) Ltd. [(2007) 6 SCC 373 = 2007 (214) E.L.T. 3
(S.C.)].
“13. Section 14(1) speaks of “deemed value”. Therefore,
invoice price can be disputed. However, it is for the
Department to prove that the invoice price is incorrect. When
there is no evidence of contemporaneous imports at a higher
price, the invoice price is liable to be accepted. The value in
the export declaration may be relied upon for ascertainment
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and not for determining the price at which goods are
ordinarily sold at the time and place of importation. This is
where the conceptual difference between value and price
comes into discussion.”
9. As per Section 14(1) of the Act, value of the imported
goods shall be the transactional value of such goods, which
means the price actually paid or payable for the goods when
sold for export to India where the buyers and sellers are not
related and the price fixed is the sole consideration for sale.
As per the first proviso to Section 14(1) of the Act, the
transactional value for the purpose of Customs duty would
include amounts paid or payable as costs and services like
commission, brokerage, engineering, design work, cost of
transportation, etc., as may be specified in the rules made in
this behalf. These amounts are to be added to the declared
transactional value. Accordingly, in terms of Rule 10 of the
2007 Rules, the value and price of costs and services are
added to the price actually paid or payable for the imported
goods for determining the transaction value.
10. Sub-section (2) of Section 14 is a non
obstante provision, which applies notwithstanding sub-
section (1), i.e. when the Board has issued a notification in
the Official Gazette fixing tariff values for any class of
imported or exported goods. The Board has been authorised
to issue notifications under Section 14(2) of the Act when it is
satisfied that it is necessary or expedient. Thus, whenever
tariff has been fixed vide notification issued by the Board
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under Section 14(2) of the Act, then notwithstanding the
transactional value of the imported goods under sub-section
(1) to Section 14 of the Act, as per sub-section (2) to Section
14 of the Act the customs duty is payable as per the tariff
value so fixed. In the present case, the Board has not
considered it necessary and expedient to issue a notification
under Section 14(2) of the Act to fix a tariff for the imported
aluminium waste.
11. The second proviso to Section 14(1) deals with different
situations, enumerated under the three clauses; (i) when
buyers and sellers are deemed to be related; (ii) when there
is no sale, or buyers and sellers are related or the price is not
the sole consideration for sale, etc. and (iii) where the proper
officer has reason to doubt the truth or accuracy of such
value. When the conditions specified in the second proviso
are satisfied, the transactional value for the purpose of
charging of Customs duty is to be made as per rules framed
in this behalf.
12. Rules 3 and 12 of the 2007 Rules i.e. Customs
Valuation (Determination of Value of Imported Goods) Rules,
2007 were enacted and enforced with effect from 10th
October, 2007 replacing and superseding the 1988 Rules.
Rule 3(1) of the 2007 Rules states that value of the imported
goods shall be the transaction value adjusted in accordance
with the provisions of Rule 10 of the 2007 Rules which Rule,
as observed above, deals with the costs and services which
are to be added to the price actually paid or payable for the
imported goods for determining the transaction value. Sub-
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rule (1) to Rule 3 is however subject to Rule 12 and therefore
give primacy to Rule 12 which we shall subsequently
elaborate and explain. Sub-rule (2) to Rule 3 states that
value of the imported goods under sub-rule (1) shall be
accepted i.e. accepted by the Customs authorities. The
proviso then vide different clauses sets out the pre-
conditions for accepting value of the imported goods. Rule
11 provides for declaration to be given by the importer or his
agent certifying that they had disclosed full and accurate
details of the value of the imported goods and any other
statement, information and document including invoice of the
manufacturer or producer of the goods where the goods are
imported from or through a person other than the
manufacturer of goods, as considered necessary by the
proper officer for valuation of the imported goods. Sub-rule
(2) states that the declared value shall be accepted where
the proper officer is satisfied about the truth and accuracy of
the declared value after an enquiry in consultation with the
importers.
13. Sub-rule (3) to Rule 3 deals with cases when the buyer
and seller are related. We would not dilate on the said sub-
rule for this is not required for the purpose of the present
decision. As per sub-rule (4), where the value cannot be
determined under sub-rule (1) to Rule 3, the transaction is to
be valued by step wise applying Rules 4 to 9. Rule 4 deals
with transaction value based on identical goods. Rule 5 deals
with transaction value based on similar goods. Rule 6 deals
with the determination of value where the transactional value
cannot be determined under Rules 3, 4 and 5. Rules 7 and 8
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deal with deductive value and computed value respectively.
Rule 9 prescribes the residual method for computing the
transaction value. What is important to note is that Rules 4 to
9 are subject to the provisions of Rule 3 thereby giving
primacy to Rule 3 which in turn gives primacy to Rule 12 of
the 2007 Rules.
14. Rule 12, which as noticed above enjoys primacy and
pivotal position, applies where the proper officer has reason
to doubt the truth or accuracy of the value declared for the
imported goods. It envisages a two-step verification and
examination exercise. At the first instance, the proper officer
must ask and call upon the importer to furnish further
information including documents to justify the declared
transactional value. The proper officer may thereafter accept
the transactional value as declared. However, where the
proper officer is not satisfied and has reasonable doubt
about the truth or accuracy of the value so declared, it is
deemed that the transactional value of such imported goods
cannot be determined under the provision of sub-rule (1) of
Rule 3 of the 2007 Rules. Clause (iii) of Explanation to Rule
12 states that the proper officer can on ‘certain reasons’
raise doubts about the truth or accuracy of declared value.
‘Certain reasons’ would include conditions specified in
clauses (a) to (f) i.e. higher value of identical similar goods of
comparable quantities in a comparable transaction, abnormal
discount or abnormal deduction from ordinary competitive
prices, sales involving the special prices, misdeclaration on
parameters such as description, quality, quantity, country of
origin, year of manufacture or production, non-declaration of
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parameters such as brand and grade etc. and fraudulent or
manipulated documents. Grounds mentioned in (a) to (f)
however are not exhaustive of ‘certain reasons’ to raise
doubt about the truth or accuracy of the declared value.
Clause (ii) to Explanation states that the declared value shall
be accepted where the proper officer is satisfied about the
truth and accuracy of the declared value after enquiry in
consultation with the importers. Clause (i) to the Explanation
states that Rule 12 does not provide a method of
determination of value but provides the procedure or
mechanism in cases where declared value can be rejected
when there is a reasonable doubt that the declared
transaction value does not represent the actual transaction
value. In such cases the transaction value is to be
sequentially determined in accordance with Rules 4 to 9 of
the 2007 Rules.
Sub-rule (2) of Rule 12 stipulates that on request of an
importer, the proper officer shall intimate to the importer in
writing the grounds, i.e. the reason for doubting the truth or
accuracy of the value declared in relation to the imported
goods. Further, the proper officer shall provide a reasonable
opportunity of being heard to the importer before he makes
the valuation in the form of final decision under sub-rule (1).
15. The requirements of Rule 12, therefore, can be
summarised as under :
(a) The proper officer should have reasonable doubt as to
the transactional value on account of truth or accuracy of the
value declared in relation to the imported goods.
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(b) Proper officer must ask the importer of such goods
further information which may include documents or
evidence;
(c) On receiving such information or in the absence of
response from the importer, the proper officer has to apply
his mind and decide whether or not reasonable doubt as to
the truth or accuracy of the value so declared persists.
(d) When the proper officer does not have reasonable
doubt, the goods are cleared on the declared value.
(e) When the doubt persists, sub-rule (1) to Rule 3 is not
applicable and transaction value is determined in terms of
Rules 4 to 9 of the 2007 Rules.
(f) The proper officer can raise doubts as to the truth or
accuracy of the declared value on ‘certain reasons’ which
could include the grounds specified in clauses (a) to (f) in
clause (iii) of the Explanation.
(g) The proper officer, on a request made by the importer,
has to furnish and intimate to the importer in writing the
grounds for doubting the truth or accuracy of the value
declared in relation to the imported goods. Thus, the proper
officer has to record reasons in writing which have to be
communicated when requested.
(h) The importer has to be given opportunity of hearing
before the proper officer finally decides the transactional
value in terms of Rules 4 to 9 of the 2007 Rules.
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16. Proper officer can therefore reject the declared
transactional value based on ‘certain reasons’ to doubt the
truth or accuracy of the declared value in which event the
proper officer is entitled to make assessment as per Rules 4
to 9 of the 2007 Rules. What is meant by the expression
“grounds for doubting the truth or accuracy of the value
declared” has been explained and elucidated in clause (iii) of
Explanation appended to Rule 12 which sets out some of the
conditions when the ‘reason to doubt’ exists. The instances
mentioned in clauses (a) to (f) are not exhaustive but are
inclusive for there could be other instances when the proper
officer could reasonably doubt the accuracy or truth of the
value declared.
17. The choice of words deployed in Rule 12 of the 2007
Rules are significant and of much consequence. The
Legislature, we must agree, has not used the expression
“reason to believe” or “satisfaction” or such other positive
terms as a pre-condition on the part of the proper officer. The
expression “reason to believe” which would have required
the proper officer to refer to facts and figures to show
existence of positive belief on the undervaluation or lower
declaration of the transaction value. The expression “reason
to doubt” as a sequitur would require a different threshold
and examination. It cannot be equated with the requirements
of positive reasons to believe, for the word ‘doubt’ refers to
un-certainty and irresolution reflecting suspicion and
apprehension. However, this doubt must be reasonable i.e.
have a degree of objectivity and basis/foundation for the
suspicion must be based on ‘certain reasons’.
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18. The expression ‘proof beyond reasonable doubt’ in
criminal law requires the prosecution to establish guilt and
secure conviction of the accused by proving the charge
‘beyond reasonable doubt’. In Ramakant Rai v. Mad an Rai
& Ors. – (2003) 12 SCC 395 referring to the expression
‘reasonable doubt’ in criminal law it was held as under :
“24. Doubts would be called reasonable if they are free
from a zest for abstract speculation. Law cannot afford any
favourite other than the truth. To constitute reasonable
doubt, it must be free from an overemotional response.
Doubts must be actual and substantial doubts as to the guilt
of the accused persons arising from the evidence, or from
the lack of it, as opposed to mere vague apprehensions. A
reasonable doubt is not an imaginary, trivial or a merely
possible doubt; but a fair doubt based upon reason and
common sense. It must grow out of the evidence in the
case.”
Proof beyond ‘reasonable doubt’ is certainly not the
requirement under proviso to Section 14 of the Act and Rule
12 of the 2007 Rules, albeit the above quote draws a
distinction between a simple doubt and a doubt which is
reasonable. In the context of the proviso to Section 14 read
with Rule 12 and clause (iii) of Explanation to the 2007
Rules, the doubt must be reasonable and based on ‘certain
reasons’. The proper officer must record ‘certain reasons’
specified in (a) to (f) or similar grounds in writing at the
second stage before he proceeds to discard the declared
value and decides to determine the same by proceeding
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sequentially in accordance with Rules 4 to 9 of the 2007
Rules. It refers to a doubt which the proper officer possesses
even after the importer has been asked to furnish further
information including documents and evidence during the
preliminary enquiry to clear his doubt about the truth and
accuracy of the value declared. Therefore, there has to be a
preliminary enquiry by the proper officer in which the
importer must be given an opportunity for clarification of the
doubts of the officer by furnishing of documents and
evidence as to the accuracy or truth of the value declared. It
is only in case where the doubt of the proper officer persists
after conducting examination of information including
documents or on account of non-furnishing of information
that the procedure for further investigation and determination
of value in terms of Rules 4 to 9 would come into operation
and would be applicable. Reasonable doubt will exist if the
doubt is reasonable and for ‘certain reasons’ and not fanciful
and absurd. A doubt to justify detailed enquiry under the
proviso to Section 14 read with Rule 12 should not be based
on initial apprehension, be imaginary or a mere perception
not founded on reasonable and ‘certain’ material. It should
be based and predicated on grounds and material in the form
of ‘certain reasons’ and not mere ipse dixit. Subjecting
imports to detailed enquiry on mere suspicion because one
is distrustful and unsure without reasonable and certain
reasons would be contrary to the scheme and purpose
behind the provisions which ensure quick and expeditious
clearance of imported goods.”
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18.3 In the case on hand, if the subject goods are construed
or treated as raw areca nuts, their valuation would have to take
place under Section 14(2) of the Customs Act, 1962, wherein tariff
values are fixed through a Notification issued by the Board, which
in the instant case is notification 54/2024-Cus (NT) dated
14.8.2024; conversely, in view of my findings recorded herein
before that the subject goods are roasted areca nuts, the
government has not fixed the tariff values and therefore, it is
essential to resort to the valuation mechanism under Section 14(1)
of the Customs Act; further, since the valuation of the respondents
rested on the classification under Chapter 8 which has been
already been negatived by me supra by holding that the subject
goods are classifiable under Chapter 20, it is clear that the
transaction value in terms of Section 14(1) has to be accepted,
especially in the absence of any quarrel on the transaction value
and consequently, having regard to the fact that the mandatory
procedure in terms of Section 14 and Rule 12 as set out by the
Apex Court having not been followed, the transaction value
declared by the petitioner deserves to be accepted by holding that
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valuation done by the respondents in relation to the subject goods
is contrary to law and the same deserves to be quashed.
Accordingly, Point No.(iii) is also answered in favour of the
petitioner.
Re: Point No.(iv);
19. The last question that arises for consideration in the
present petitions is as to whether the impugned SCN proposing
duty demands and confiscation and all further proceedings
pursuant thereto in respect of the subject goods warrant
interference by this Court in the present petitions.
19.1 A perusal of the material on record will indicate that
the impugned SCN and proposed duty demand and confiscation
are clearly premature having been done on 17.12.2024, particularly
when even according to the respondents themselves, the
provisional assessment was resorted to only on 23.5.2025; even
assuming that provisional assessment was done on the day of
import i.e., on 6.9.2024, show cause notices under Section 28 or
Section 124 could not have been issued unless the assessments
were finalised in the light of the judgment of the Apex Court in the
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case of CC vs Canon India Pvt.Ltd – 2024 (11) TMI 391 (SC)
wherein it was held as under:
” iv. Scheme of Sections 17 and 28 of the Act, 1962
95. Section 17 read with Sections 46 and 47 of the Act, 1962
deals with the assessment and re-assessment at the first
instance that is, upon entry of the consignments and
clearance of bill(s) of entry. The amendment to Section 17
introduces the process of self-assessment and subsequent
re-assessment upon verification by the proper officer, if so
required, for undertaking a check at the first instance.
96. The proceedings under Section 28 are subsequent to the
completion of the process set out in Section 17 of the Act,
1962. The procedure envisaged under Section 28 is in the
nature of a quasi-judicial proceeding with the issuance of the
show cause notice by the proper officer followed by
adjudication of such notices by the field customs officers. It is
also worth noting that in the case of DRI, the proceedings
under Section 28 start only after an investigation has been
undertaken by DRI. This is reaffirmed by Circular No. 4/99-
Cus dated 15.02.1999 and Circular No. 44/2011- Customs
dated 23.11.2011. Therefore, the nature of review under
Section 28 is significantly different from the nature of
assessment and reassessment under Section 17. The ambit
of Section 28 has also been restricted to the review of
assessments and re-assessments done under Section 17 for
ascertaining if there has been a short-levy, non-levy,
partpayment, non-payment or erroneous refund.”
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19.2 In this context, it is also necessary to advert to Section
28 of the Customs Act which reads as under:
1
[28. Recovery of 7[duties not levied or not paid or short-
levied or short-paid] or erroneously refunded.
(1) Where any 8[duty has not been levied or not paid or has
been short-levied or short- paid] or erroneously refunded, or
any interest payable has not been paid, part-paid or
erroneously refunded, for any reason other than the reasons
of collusion or any wilful mis-statement or suppression of
facts,-
(a) the proper officer shall, within 9[two years] from the
relevant date, serve notice on the person chargeable with the
duty or interest which has not been so levied 10[or paid] or
which has been short-levied or short-paid or to whom the
refund has erroneously been made, requiring him to show
cause why he should not pay the amount specified in the
notice;
18
[Provided that before issuing notice, the proper officer shall
hold pre-notice consultation with the person chargeable with
duty or interest in such manner as may be prescribed;]
(b) the person chargeable with the duty or interest, may pay
before service of notice under clause (a) on the basis of,-
(i) his own ascertainment of such duty; or
(ii) the duty ascertained by the proper officer, the amount of
duty along with the interest payable thereon under section
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28AA or the amount of interest which has not been so paid
or part-paid.
3
[Provided that the proper officer shall not serve such show
cause notice, where the amount involved is less than rupees
one hundred. ]
(2) The person who has paid the duty along with interest or
amount of interest under clause (b) of sub-section (1) shall
inform the proper officer of such payment in writing, who, on
receipt of such information shall not serve any notice under
clause (a) of that sub-section in respect of the duty or
interest so paid or any penalty leviable under the provisions
of this Act or the rules made there under in respect of such
duty or interest.
4
[Provided that where notice under clause (a) of sub-section
(1) has been served and the proper officer is of the opinion
that the amount of duty along with interest payable thereon
under section 28AA or the amount of interest, as the case
may be, as specified in the notice, has been paid in full within
thirty days from the date of receipt of the notice, no penalty
shall be levied and the proceedings against such person or
other persons to whom the said notice is served under
clause (a) of sub-section (1) shall be deemed to be
concluded.]
(3) Where the proper officer is of the opinion that the amount
paid under clause (b) of sub-section (1) falls short of the
amount actually payable, then, he shall proceed to issue the
notice as provided for in clause (a) of that sub-section in
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respect of such amount which falls short of the amount
actually payable in the manner specified under that sub-
section and the period of 11[two years] shall be computed
from the date of receipt of information under sub-section (2).
(4) Where any duty has not been 12[levied or not paid or has
been short-levied or short-paid] or erroneously refunded, or
interest payable has not been paid, part-paid or erroneously
refunded, by reason of,-
(a) collusion; or
(b) any wilful mis-statement; or
(c) suppression of facts,
by the importer or the exporter or the agent or employee of
the importer or exporter, the proper officer shall, within five
years from the relevant date, serve notice on the person
chargeable with duty or interest which has not been 13[so
levied or not paid] or which has been so short-levied or short-
paid or to whom the refund has erroneously been made,
requiring him to show cause why he should not pay the
amount specified in the notice.
(5) Where any 14[duty has not been levied or not paid or has
been short-levied or short-paid] or the interest has not been
charged or has been part-paid or the duty or interest has
been erroneously refunded by reason of collusion or any
wilful mis-statement or suppression of facts by the importer
or the exporter or the agent or the employee of the importer
or the exporter, to whom a notice has been served under
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sub-section (4) by the proper officer, such person may pay
the duty in full or in part, as may be accepted by him, and the
interest payable thereon under section 28AA and the penalty
equal to 5[fifteen per cent.] of the duty specified in the notice
or the duty so accepted by that person, within thirty days of
the receipt of the notice and inform the proper officer of such
payment in writing.
(6) Where the importer or the exporter or the agent or the
employee of the importer or the exporter, as the case may
be, has paid duty with interest and penalty under sub-section
(5), the proper officer shall determine the amount of duty or
interest and on determination, if the proper officer is of
theopinion-
(i) that the duty with interest and penalty has been paid in
full, then, the proceedings in respect of such person or other
persons to whom the notice is served under sub-section (1)
or subsection (4), shall, without prejudice to the provisions of
sections 135, 135A and 140 be deemed to be conclusive as
to the matters stated therein; or
(ii) that the duty with interest and penalty that has been paid
falls short of the amount actually payable, then the proper
officer shall proceed to issue the notice as provided for in
clause (a) of sub-section (1) in respect of such amount which
falls short of the amount actually payable in the manner
specified under that sub-section and the period of 15[two
years] shall be computed from the date of receipt of
information under sub-section (5).
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(7) In computing the period of 16[two years] referred to in
clause (a) of sub-section (1) or five years referred to in sub-
section (4), the period during which there was any stay by an
order of a court or tribunal in respect of payment of such duty
or interest shall be excluded.
19
[(7A) Save as otherwise provided in clause (a) of sub-
section (1) or in sub-section (4), the proper officer may issue
a supplementary notice under such circumstances and in
such manner as may be prescribed, and the provisions of
this section shall apply to such supplementary notice as if it
was issued under the said sub-section (1) or sub-section (4).]
(8) The proper officer shall, after allowing the concerned
person an opportunity of being heard and after considering
the representation, if any, made by such person, determine
the amount of duty or interest due from such person not
being in excess of the amount specified in the notice.
(9) The proper officer shall determine the amount of duty or
interest under sub-section (8),-
(a) within six months from the date of notice 20[***] in respect
of cases falling under clause (a) of subsection (1);
(b) within one year from the date of notice 20[***] in respect of
cases falling under sub-section (4).
21
[Provided that where the proper officer fails to so determine
within the specified period, any officer senior in rank to the
proper officer may, having regard to the circumstances under
which the proper officer was prevented from determining the
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amount of duty or interest under sub-section (8), extend the
period specified in clause (a) to a further period of six months
and the period specified in clause (b) to a further period of
one year:
Provided further that where the proper officer fails to
determine within such extended period, such proceeding
shall be deemed to have concluded as if no notice had been
issued.]22
[(9A) Notwithstanding anything contained in sub-section
(9), where the proper officer is unable to determine the
amount of duty or interest under sub-section (8) for the
reason that-
(a) an appeal in a similar matter of the same person or any
other person is pending before the Appellate Tribunal or the
High Court or the Supreme Court; or
(b) an interim order of stay has been issued by the Appellate
Tribunal or the High Court or the Supreme Court; or
(c) the Board has, in a similar matter, issued specific
direction or order to keep such matter pending; or
(d) the Settlement Commission has admitted an application
made by the person concerned,the proper officer shall inform the person concerned the
reason for non-determination of the amount of duty or
interest under sub-section (8) and in such case, the time
specified in sub-section (9) shall apply not from the date of
notice, but from the date when such reason ceases to exist.]
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(10) Where an order determining the duty is passed by the
proper officer under this section, the person liable to pay the
said duty shall pay the amount so determined along with the
interest due on such amount whether or not the amount of
interest is specified separately.
23
[(10A) Notwithstanding anything contained in this Act,
where an order for refund under sub-section (2) of section 27
is modified in any appeal and the amount of refund so
determined is less than the amount refunded under said sub-
section, the excess amount so refunded shall be recovered
along with interest thereon at the rate fixed by the Central
Government under section 28AA, from the date of refund up
to the date of recovery, as a sum due to the Government.
(10B) A notice issued under sub-section (4) shall be deemed
to have been issued under sub-section (1), if such notice
demanding duty is held not sustainable in any proceeding
under this Act, including at any stage of appeal, for the
reason that the charges of collusion or any wilful mis-
statement or suppression of facts to evade duty has not been
established against the person to whom such notice was
issued and the amount of duty and the interest thereon shall
be computed accordingly.]
2
[(11) Notwithstanding anything to the contrary contained in
any judgment, decree or order of any court of law, tribunal or
other authority, all persons appointed as officers of Customs
under sub-section (1) of section 4 before the 6th day of July,
2011 shall be deemed to have and always had the power of
assessment under section 17 and shall be deemed to have
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been and always had been the proper officers for the
purposes of this section.]
Explanation 1. – For the purposes of this section, “relevant
date” means,-
(a) in a case where duty is 17[not levied or not paid or short-
levied or short-paid], or interest is not charged, the date on
which the proper officer makes an order for the clearance of
goods;
(b) in a case where duty is provisionally assessed under
section 18, the date of adjustment of duty after the final
assessment thereof or re-assessment, as the case may be;
26
[(ba) in a case where duty is paid under clause (a) of sub-
section (3) of section 18A, the date of payment of duty or
interest;]
(c) in a case where duty or interest has been erroneously
refunded, the date of refund;
(d) in any other case, the date of payment of duty or
interest.’.
Explanation 2. – For the removal of doubts, it is hereby
declared that any non-levy, short-levy or erroneous refund
before the date on which the Finance Bill, 2011 receives the
assent of the President, shall continue to be governed by the
provisions of section 28 as it stood immediately before the
date on which such assent is received.]
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6
[Explanation 3.- For the removal of doubts, it is hereby
declared that the proceedings in respect of any case of non-
levy, short-levy, non-payment, short payment or erroneous
refund where show cause notice has been issued under
subsection (1) or sub-section (4), as the case may be, but an
order determining duty under sub-section (8) has not been
passed before the date on which the Finance Bill, 2015
receives the assent of the President, shall, without prejudice
to the provisions of sections 135, 135A and 140, as may be
applicable, be deemed to be concluded, if the payment of
duty, interest and penalty under the proviso to sub-section
(2) or under sub-section (5), as the case may be, is made in
full within thirty days from the date on which such assent is
received.]
25
[Explanation 4.-For the removal of doubts, it is hereby
declared that notwithstanding anything to the contrary
contained in any judgment, decree or order of the Appellate
Tribunal or any Court or in any other provision of this Act or
the rules or regulations made thereunder, or in any other law
for the time being in force, in cases where notice has been
issued for non-levy, short-levy, non-payment, short-payment
or erroneous refund, prior to the 29th day of March, 2018,
being the date of commencement of the Finance Act, 2018
(13 of 2018.), such notice shall continue to be governed by
the provisions of section 28 as it stood immediately before
such date.]
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19.3 So also, Section 124 of the Customs Act, reads as
under:
SECTION 124. Issue of show cause notice before
confiscation of goods, etc. – No order confiscating any
goods or imposing any penalty on any person shall be made
under this Chapter unless the owner of the goods or such
person –
(a) is given a notice in writing with the prior approval of the
officer of Customs not below the rank of 1[an Assistant
Commissioner of Customs], informing him of the grounds on
which it is proposed to confiscate the goods or to impose a
penalty;
(b) is given an opportunity of making a representation in
writing within such reasonable time as may be specified in
the notice against the grounds of confiscation or imposition
of penalty mentioned therein; and
(c) is given a reasonable opportunity of being heard in the
matter :
Provided that the notice referred to in clause (a) and the
representation referred to in clause (b) may, at the request of
the person concerned be oral.
2
[Provided further that notwithstanding issue of notice under
this section, the proper officer may issue a supplementary
notice under such circumstances and in such manner as
may be prescribed.]
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WP No. 33823 of 2024
C/W WP No. 17776 of 2025
WP No. 24075 of 2025
HC-KAR19.4 If the impugned SCN is examined in the light of the
aforesaid provisions, it is clear that even if provisional assessments
were to be resorted to under Section 18, they would necessarily
have to be finalised in terms of Section 18 before a proceeding
under Section 28 can be commenced by the respondents; the
definition of relevant date found in Explanation 1(b) to Section 28
also provides that the time period for issuing show cause notice
under Section 28 would arise from the date of adjustment of duty
after final assessment in cases covered under Section 18; in the
instant cases, in view of the undisputed fact that provisional
assessments are still continuing as per the stance of the
respondents themselves, it was impermissible in law to issue the
impugned SCN under Section 28, thereby leading to the sole
conclusion that the impugned SCN was clearly illegal, invalid,
premature and contrary to the provisions of the Customs Act and
the impugned SCN and all further proceedings thereto deserve to
be quashed as a consequence of which even the continuation of
the impugned confiscatory proceedings is impermissible and
unsustainable in law, especially when I have already come to the
conclusion that the subject goods being roasted areca nuts are not
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C/W WP No. 17776 of 2025
WP No. 24075 of 2025
HC-KAR
prohibited and therefore, the question of confiscating them will not
arise in the facts and circumstances of the instant case. Under
these circumstances, I am of the considered opinion that the
impugned SCN proposing duty demands and confiscation on the
subject goods imported by the petitioner and all further proceedings
pursuant thereto including confiscation of the subject goods
deserve to be quashed by directing the respondents to release the
subject goods in favour of the petitioner within a stipulated time
frame by issuing certain directions in this regard.
Accordingly, Point No.(iv) is also answered in favour of the
petitioner.
20. In the result, I pass the following:
ORDER
(i) W.P.No. 33823/2024 is hereby allowed.
(ii) The impugned seizure memorandum at Annexure-D
dated 06.12.2024 is hereby quashed.
(iii) W.P.No.17776/2025 is hereby allowed.
(iv) The impugned communication at Annexure-A dated
23.05.2025 is hereby quashed.
(v) W.P.No.24075/2025 is hereby allowed.
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WP No. 33823 of 2024
C/W WP No. 17776 of 2025
WP No. 24075 of 2025
HC-KAR
(vi) The impugned show cause notice at Annexure – B dated
17.12.2024 is hereby quashed.
(vii) The respondents are hereby directed to release the
subject imported goods in favour of the petitioner within a period of
7 days from the date of receipt of a copy of this order by adopting
the classification and valuation adopted by the petitioner and as the
petitioner – importer has already filed the FSSAI reports, which
would be sufficient compliance for the said purposes.
(viii) Respondents are also hereby directed to issue a
certificate of waiver of demurrage, detention and ground rent
charges in favour of the petitioner within a period of seven days
from the date of receipt of a copy of this order.
Sd/-
(S.R.KRISHNA KUMAR)
JUDGE
SRL
