Karnataka High Court
Union Of India vs M/S Tmk Traders on 9 April, 2026
Author: S.G.Pandit
Bench: S.G.Pandit
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WA No. 1925 of 2025
Reserved on : 02.04.2026
Pronounced on : 09.04.2026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF APRIL, 2026
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE MR. JUSTICE K. V. ARAVIND
WRIT APPEAL No. 1925 OF 2025 (T-CUS)
BETWEEN:
1. UNION OF INDIA,
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF INDIRECT TAX
AND CUSTOMS, NORTH BLOCK,
NEW DELHI-110001,
REPRESENTED BY ITS SECRETARY.
Digitally signed 2. THE JOINT COMMISSIONER OF CUSTOMS
by VINUTHA B OFFICE OF THE ADDITIONAL
S
Location: High
COMMISSIONER OF CUSTOMS,
Court of BENGALURU CITY CUSTOMS
Karnataka COMMISSIONERATE,
INLAND CUSTOMS DEPOT,
WHITEFIELD, BENGALURU 560066.
3. THE DEPUTY COMMISSIONER OF CUSTOMS,
OFFICE OF THE ADDITIONAL
COMMISSIONER OF CUSTOMS,
BENGALURU CITY CUSTOMS
COMMISSIONERATE,
INLAND COSTOMS DEPOT,
WHITEFIELD, BENGALURU -560066.
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WA No. 1925 of 2025
4. THE ASSISTANT COMMISSIONER OF CUSTOMS
SIIB, OFFICE OF THE ADDITIONAL
COMMISSIONER OF CUSTOMS,
BENGALURU CITY CUSTOMS
COMMISSIONERATE,
INLAND CUSTOMS DEPOT,
WHITEFIELD, BENGALURU-560066.
5. CENTRAL REVENUES CONTROL LABORATORY,
HILLSIDE ROAD, PUSA,
NEW DELHI - 110012,
REPRESENTED BY ITS DIRECTOR.
6. FOOD SAFETY AND STANDARDS
AUTHORITY OF INDIA,
FSSAI, 4TH FLOOR, MANUVANA,
NEAR HOSAHALLI METRO STATION,
VIJAY NAGAR, BANGALORE-560040.
REPRESENTED BY ITS ASSISTANT DIRECTOR.
7. CENTRAL PLANTATION CROPS
RESEARCH INSTITUTE,
KASARGOD, KERALA - 671124,
REPRESENTED BY ITS DIRECTOR.
...APPELLANTS
(BY SRI K. ARAVIND KAMATH, ASG A/W
SRI M.UNNIKRISHNAN, SENIOR STANDING COUNSEL)
AND:
1. M/S TMK TRADERS,
REPRESENTED BY ITS PROPRIETOR,
SHRI DURAISAMY THIRUMALAI,
AGED 54 YEARS,
S/O THIRUMALAI,
HAVING A OFFICE AT:
65, W-29, RANGER OFFICE ROAD,
KAMBAM, THENI, TAMIL NADU -625516.
...RESPONDENT
(BY SRI M.S. SAJEEV KUMAR, ADVOCATE FOR
SRI ASWIN PRABHU S. D., ADVOCATE FOR C/R1)
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WA No. 1925 of 2025
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SETTING ASIDE
THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP
No.24835/2025 DATED 29/10/2025 AND CONSEQUENTLY
DISMISS THE SAID PETITION.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY,
K.V. ARAVIND J., DELIVERED THE FOLLOWING:-
CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
and
HON'BLE MR. JUSTICE K. V. ARAVIND
C.A.V. JUDGMENT
(PER: HON'BLE MR. JUSTICE K. V. ARAVIND)
Heard Sri. K. Aravind Kamath, learned Additional Solicitor
General along with Sri. M. Unnikrishnan, learned Senior
Standing counsel for appellants and Sri. M.S. Sanjeev Kumar,
learned counsel for Sri. Aswin Prabhu S.D., learned counsel for
caveator/respondent No.1.
2. This intra-Court appeal is filed by the Revenue,
impugning the order dated 29.10.2025 passed by the learned
Single Judge in W.P. No.24835/2025.
3. The brief facts, in nutshell, are that the respondent
imported 54 metric tons of betel nuts from Indonesia and filed
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WA No. 1925 of 2025
Bill of Entry No.8953207 dated 18.03.2025. The respondent
claimed that the imported goods were roasted arecanuts. The
appellants subjected the goods to sampling and testing by the
Indian Council of Agricultural Research (for short, ‘ICAR’).
ICAR, in its test report, opined that the imported goods were
not roasted arecanuts.
3.1 Aggrieved thereby, the respondent filed a writ petition
seeking a writ of mandamus to release the goods covered
under the Bill of Entry or, in the alternative, to direct drawing
of fresh samples from the consignment and to conduct re-
testing of such samples through any agency accredited by the
Food Safety and Standards Authority of India (for short,
‘FSSAI’).
3.2 The learned Single Judge, under the impugned order,
directed the appellants to release the imported consignment,
subject to the respondent furnishing a bank guarantee to the
extent of 25% of the value of the goods, as indicated in the Bill
of Entry and the Commercial Invoice dated 17.02.2024.
4. Sri K. Aravind Kamath, learned Additional Solicitor
General appearing for the appellants-Revenue, submits that
the Bill of Entry describes the imported goods as roasted betel
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WA No. 1925 of 2025
nuts. However, according to the appellants, the goods are, in
fact, raw betel nuts falling under a different tariff classification.
Samples of the goods were sent for testing to the ICAR-Central
Plantation Crops Research Institute, Kasaragod. ICAR, in its
report dated 16.06.2025, upon examining the samples and
their moisture content, has concluded that the samples are raw
dried arecanuts and not roasted arecanuts. It is further
submitted that, as per the said report, the samples have not
undergone the process of roasting, but have only undergone
partial drying.
4.1 It is contended that, in view of the ICAR report, the goods
are liable to be provisionally assessed as raw arecanuts under
Tariff Heading 080280. It is further submitted that, in terms of
Section 14(1) of the Customs Act, 1962 (for short, ‘the Act’),
the transaction value of the goods is ordinarily to be adopted.
However, sub-section (2) of Section 14 empowers the Board to
fix tariff values for any class of imported goods,
notwithstanding anything contained in sub-section (1).
4.2 In exercise of the powers conferred under Section 14(2)
of the Act, the Board has issued Notification No. 13/2025 dated
13.03.2025, effective from 14.03.2025, prescribing the tariff
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WA No. 1925 of 2025
value of arecanuts falling under Tariff Heading 080280 at USD
8140. It is submitted that, if the imported goods are assessed
as raw arecanuts by applying the notified tariff value, the value
of the goods would be Rs.3,85,93,368/-.
4.3 It is further submitted that, if the goods are to be
released, such release ought to be subject to deposit of 100%
of the duty on the value so determined, pending final
adjudication. In this regard, it is contended that, in view of the
tariff value notified under Section 14(2) of the Act, the direction
of the learned Single Judge to release the goods subject to
furnishing a bank guarantee to the extent of 25% of the invoice
value is erroneous.
4.4 Learned Additional Solicitor General further submits that
the genuineness of the respondent’s business cannot be
ascertained merely by inspection of the business premises. It is
contended that, though a registration certificate has been
issued, the business premises do not appear to be genuine. It
is further submitted that the respondent does not possess
sufficient fixed assets or creditworthiness to secure recovery of
dues, subject to the outcome of the adjudication proceedings.
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WA No. 1925 of 2025
4.5 It is submitted that, on account of the pendency of the
writ petition and the present appeal, a show cause notice has
not yet been issued for final determination of liability. It is
further contended that the goods may be released only upon
deposit of 100% of the duty, determined by treating the
imported goods as raw arecanuts and by applying the tariff
value notified under Section 14(2) of the Act in Notification
No.13/2025-Customs (N.T.) dated 13.03.2025.
4.6 Learned Additional Solicitor General further submits that,
in terms of Notification No.02/2025-26 dated 02.04.2025
issued by the Ministry of Commerce and Industry, Department
of Commerce, Director General of Foreign Trade, roasted
arecanuts are not covered under Tariff Item 08028090.
5. Per contra, Sri M. S. Sajeev Kumar, learned counsel
appearing for Sri Aswin Prabhu S.D., learned counsel for the
respondent submits that that the invoice clearly describes the
imported goods as whole roasted betel nuts and that the import
has been effected pursuant to an Advance Authorisation. It is
further contended that, in terms of Section 110(2) of the Act, if
no notice of adjudication is issued within a period of six months
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WA No. 1925 of 2025
from the date of seizure, the goods are liable to be returned to
the person from whose possession they were seized. In the
present case, it is submitted that the said period of six months
has long since expired.
5.1 Learned counsel further submits that the report of the
ICAR-Central Plantation Crops Research Institute, Kasaragod,
relied upon by the Revenue to contend that the imported goods
are not roasted arecanuts, cannot be relied upon, as ICAR is
not the competent authority to determine classification of
goods for customs purposes.
5.2 It is also contended that the tariff value notified under
Section 14(2) of the Act applies only to arecanuts and not to
roasted arecanuts, and that there is no notification under
Section 14(2) fixing tariff value insofar as roasted arecanuts
are concerned. It is submitted that Notification dated
02.04.2025 issued by the Director General of Foreign Trade has
no application to the present case, as the same operates
prospectively.
5.3 Learned counsel further submits that the respondent
possesses sufficient valuable assets to safeguard the interests
of the Revenue, subject to the outcome of the adjudication
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proceedings. It is also contended that the Revenue has
unnecessarily delayed both the release of the seized goods and
the initiation of adjudication proceedings.
5.4 It is submitted that, having regard to the nature of the
goods, the same are liable to be released. It is further
contended that, in the absence of any notification under
Section 14(2) of the Act fixing the tariff value for roasted
arecanuts, Section 14(1) would apply, and therefore, the
learned Single Judge was justified in directing release of the
goods upon furnishing a bank guarantee to the extent of 25%
of the invoice value.
5.5 Without prejudice to the aforesaid submissions, learned
counsel for the respondent-petitioner submits that the
respondent is willing to deposit a sum of ₹20,00,000/- for
immediate release of the goods, without prejudice to the
contentions to be urged in the adjudication proceedings.
6. We have bestowed our consideration to the submissions
made and the appeal papers.
7. The central dispute in the present case pertains to the
classification of the imported goods, namely, whether they are
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dried arecanuts or roasted arecanuts. The respondent-
petitioner places reliance on the invoice issued by the exporter
from Indonesia, which describes the goods as whole roasted
betel nuts, and on that basis the Bill of Entry has been filed.
The Revenue, disputing such classification, subjected samples
of the imported goods to expert examination by the ICAR-
Central Plantation Crops Research Institute, Kasaragod. ICAR,
in its report dated 16.06.2025, has opined that the samples
have not undergone the process of roasting, though they have
undergone partial drying.
7.1 Whether the imported goods are roasted arecanuts or
dried arecanuts is a matter that requires adjudication by the
competent authority under the provisions of the Act. Any
observation on the merits of such classification at this stage
would prejudice the interests of either party. The appellants
have, however, relied upon the expert opinion indicating that
the imported goods are not roasted arecanuts.
7.2 Insofar as the issue relating to the quantum of security
for release of the goods is concerned, Section 14(1) of the Act
provides for adoption of the transaction value, whereas sub-
section (2), which operates notwithstanding sub-section (1),
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WA No. 1925 of 2025
empowers the Board to notify tariff values for any class of
imported goods, in which event duty is chargeable with
reference to such tariff value. In exercise of powers under
Section 14(2), the Board has issued Notification No. 13/2025-
Customs (N.T.) dated 13.03.2025, fixing the tariff value of
arecanuts under Tariff Heading 080280 at USD 8140 per metric
ton.
7.3 In order to examine the contention and apprehension of
the Revenue regarding the genuineness and financial credibility
of the respondent, this Court, during the course of hearing,
directed the respondent to place its financial statements on
record. Pursuant thereto, the respondent has produced the
bank statement for the period from 01.04.2025 to 23.03.2026
maintained with ICICI Bank, along with a memo dated
25.03.2026. The trading and profit and loss account for the
year ending 31.03.2025, as well as the balance sheet as on
31.03.2025, are also placed on record.
7.4 A perusal of the bank statement, which contains 333
entries for the aforesaid period, does not inspire confidence as
to the financial credibility of the respondent, as the balance has
consistently remained only in a few thousands. The balance
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WA No. 1925 of 2025
sheet reflects cash in hand of Rs.28,090/- and cash at bank of
Rs.26,369/- as on 31.03.2025. The value of furniture and
fittings, building, vehicle, machinery and office assets does not
appear to be substantial enough to meet any potential liability.
Though receivables are shown to the extent of
Rs.3,06,53,679/-, we find it difficult to conclude that the
interests of the Revenue are adequately safeguarded on the
basis of the bank statement and the balance sheet.
7.5 Prima facie, the material on record, particularly the ICAR
report, indicates that the imported goods appear not to be
roasted arecanuts. Further, the valuation of the goods would be
required to be undertaken with reference to the tariff value
notified under Section 14(2) of the Act. It is also to be noted
that the proceedings have remained pending with the
authorities since March 2025 for more than one year. When
queried regarding the stage of adjudication, it is submitted that
the adjudication proceedings are yet to be initiated by issuance
of a show cause notice, and that such notice has not been
issued in view of the pendency of the writ petition and the
present appeal.
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7.6 We find no justification in the said submission. The writ
petition was filed seeking a direction for release of the goods,
and there was no interim order restraining the authorities from
initiating adjudication proceedings. The authorities had the
benefit of the ICAR report as early as 16.06.2025. Having
regard to the nature of the goods, which are perishable, prompt
action was warranted.
7.7 On the one hand, the Revenue pleads the need to protect
its interests; on the other hand, it has failed to discharge its
obligation of initiating adjudication proceedings. Such inaction
is not appreciable. The lack of diligence on the part of the
authorities ought not to cause prejudice or place the taxpayer
in a disadvantageous position. Non-adjudication for a period
exceeding one year is wholly unjustifiable.
7.8 At the same time, the inaction of the authorities cannot
be permitted to operate to the benefit of the respondent
without adequately safeguarding public revenue. The
classification of the imported goods remains pending
adjudication and is required to be determined by the competent
authority in accordance with law.
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8. Having regard to the facts and circumstances of the
present case, and in order to protect the interests of both
parties, we deem it appropriate to pass the following order and
directions:
(i) The appellants shall issue show cause
notice within 2 weeks from today.
(ii) The respondent is granted 3 weeks time
to file reply to the show cause notice
from its date.
(iii) The competent authority shall adjudicate the
show cause notice within a period of three
weeks from the date of filing of reply by the
respondent. The question of release of the
goods in question shall be considered subject
to the outcome of such adjudication.
(iv) In the alternative, if the respondent deposits
50% of the determined amount, i.e.,
₹3,85,93,368/-, and furnishes a bank
guarantee for 25% of the said amount, the
goods shall be released pending adjudication
of the proceedings proposed to be initiated.
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9. With the above observations and to the extent indicated
hereinabove, the order of the learned Single Judge dated
29.10.2025 passed in W.P. No. 24835/2025 stands modified.
Accordingly, the writ appeal is disposed of.
Sd/-
(S.G.PANDIT)
JUDGE
Sd/-
(K. V. ARAVIND)
JUDGE
VBS
