2025 (4) TMI 1418 - HC - Customs

Classification of imported Roasted Areca Nuts - to be classified under Chapter Heading 2008 19 20 (Chapter 20) or under Chapter Heading 080280 (Chapter 8) of the Customs Tariff Act 1975 for the purpose of levy of Basic Customs Duty (BCD)? - HELD THAT - Considering the submissions made by learned advocates for the respective parties without entering into the merits of the matter the petition is disposed of by issuing the directions in the interest of justice - The petitioner shall deposit Rs.3, 25, 000/- being 15% of 30% Basic Customs Duty and 10% SWS on BCD on declared value of the goods imported. Petition disposed off.

2023 (8) TMI 492 - HC

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

Whether the imported Roasted Areca Nuts should be classified under Chapter Heading 2008 19 20 (Chapter 20) or under Chapter Heading 080280 (Chapter 8) of the Customs Tariff Act, 1975 for the purpose of levy of Basic Customs Duty (BCD).
Whether the petitioner is entitled to clearance of the imported goods for home consumption based on the classification under Chapter 20 as per the Advance Ruling.
Whether the respondents were justified in withholding clearance and demanding provisional bond and Bank Guarantee of 25% of the differential duty for provisional release of the goods.
The legality and reasonableness of the condition imposed by the respondents to submit a Bank Guarantee of 25% of the differential duty for provisional release of the imported goods.
The procedural aspect relating to the assessment of the Bill of Entry and the authority's obligation to pass final assessment orders after considering the petitioner's submissions and evidence.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Roasted Areca Nuts under Customs Tariff Act

Relevant legal framework and precedents: The classification of goods under the Customs Tariff Act, 1975 is governed by the Harmonized System of Nomenclature (HSN) and the First Schedule of the Customs Tariff Act. Section 28H(1) of the Customs Act, 1962 empowers an importer to seek an Advance Ruling on classification issues. The petitioner had sought such ruling for Roasted Areca Nuts to clarify whether they fall under Chapter 8 (edible fruits and nuts), Chapter 20 (prepared foodstuffs), or Chapter 21 (miscellaneous edible preparations).

The Customs Authorities for Advance Ruling, relying on a precedent from the Madras High Court in Commissioner of Customs, Chennai vs. Shahnaz Commodities International Private Limited (2023), held that Roasted Areca Nuts merit classification under Chapter Heading 20081920 of Chapter 20. This classification carries a lower or exempted Basic Customs Duty compared to Chapter 8 classification.

Court's interpretation and reasoning: The Court noted the Advance Ruling and the reliance on the Madras High Court decision. The ruling was based on the nature of the goods as "Roasted Areca Nuts" which are processed and hence fall under Chapter 20, which covers prepared foodstuffs, rather than raw nuts under Chapter 8. The CRCL report supported this classification by confirming the product's characteristics and fitness for human consumption.

Key evidence and findings: The CRCL's test report dated 14.02.2025 confirmed that the sample possesses characteristics of Areca Nuts and is fit for human consumption. This scientific examination supports the petitioner's classification claim.

Application of law to facts: The petitioner's classification under Chapter 20 is consistent with the Advance Ruling and the scientific evidence. The respondents' insistence on classification under Chapter 8, which attracts a higher duty, is contrary to the Advance Ruling and the evidence.

Treatment of competing arguments: The respondents contended that the goods were under examination and demanded a Bank Guarantee of 25% of the differential duty for provisional release, implying a presumption in favor of classification under Chapter 8. The Court did not delve into merits but recognized the procedural stance of the respondents.

Conclusion: The Court acknowledged the petitioner's prima facie entitlement to classification under Chapter 20 as per the Advance Ruling and CRCL report, but did not conclusively decide on classification due to ongoing proceedings.

Issue 2: Provisional Release and Conditions Imposed by Respondents

Relevant legal framework and precedents: Under the Customs Act, 1962, provisional release of imported goods can be allowed subject to conditions such as submission of bonds and Bank Guarantees, especially where classification or duty disputes exist. The respondents' letter dated 21.02.2025 required the petitioner to submit a provisional bond and Bank Guarantee of 25% of the differential duty for provisional release.

Court's interpretation and reasoning: The Court observed that the petitioner was willing to comply with reasonable conditions but found the demand for 25% Bank Guarantee onerous, especially in light of the CRCL report supporting the petitioner's classification. The petitioner offered to deposit Rs.3,25,000/- representing 15% of 30% BCD and 10% Social Welfare Surcharge (SWS) on the declared value, along with a provisional bond for the entire value.

Key evidence and findings: The petitioner's readiness to submit partial deposit and provisional bond demonstrated willingness to cooperate, while the respondents' insistence on a higher Bank Guarantee was viewed as excessive.

Application of law to facts: The Court balanced the interests of revenue protection and petitioner's rights by directing a reduced deposit and provisional release, thus facilitating trade without prejudice to final assessment.

Treatment of competing arguments: The respondents sought to protect revenue by insisting on higher security, while the petitioner emphasized the hardship and the supporting evidence favoring their classification. The Court adopted a middle path.

Conclusion: The Court directed provisional release on conditions less onerous than those demanded by the respondents, ensuring procedural fairness.

Issue 3: Final Assessment of the Bill of Entry

Relevant legal framework and precedents: The Customs Act mandates final assessment of imported goods after due examination and consideration of submissions and evidence by the importer.

Court's interpretation and reasoning: The Court directed the respondents to pass final assessment orders expeditiously after receipt of the petitioner's reply and evidence as per the letter dated 21.02.2025.

Key evidence and findings: The petitioner's undertaking to submit replies and evidence was noted.

Application of law to facts: The Court emphasized procedural compliance and timely disposal of assessment to avoid undue delay.

Treatment of competing arguments: No specific competing argument on this procedural aspect was noted.

Conclusion: The respondents were directed to complete final assessment promptly.

3. SIGNIFICANT HOLDINGS

The Court held:

"Considering the submissions made by learned advocates for the respective parties, without entering into the merits of the matter, the petition is disposed of by issuing the following directions in the interest of justice..."

Core principles established include:

Advance Ruling under Section 28H(1) of the Customs Act provides prima facie classification guidance, which must be given due weight in assessment.
Scientific examination reports such as from CRCL are material evidence supporting classification claims.
Provisional release of imported goods can be granted on reasonable conditions balancing revenue interests and importer's rights, and onerous demands for Bank Guarantees may be moderated by the Court.
Final assessment orders must be passed expeditiously after considering all submissions and evidence.

Final determinations on each issue were procedural rather than substantive, with the Court directing: