Customs to Decide on Bank Guarantee Release in Tobacco Export Dispute: Delhi HC Questions Second CRCL Report

The Delhi High Court has directed the Commissioner of Customs to expeditiously decide representations seeking release of bank guarantees furnished during provisional clearance of export consignments. The bench of Justice Prathiba M. Singh and Justice Shail Jain flagged serious concerns over the issuance of a second laboratory report without fresh sampling, while disposing of a writ petition filed by an exporter of tobacco-related products. The case arose from a writ petition filed under Article 226 of the Constitution, challenging the continued withholding of export benefits and bank guarantees despite favourable initial laboratory reports. The petitioner, an exporter engaged in the overseas supply of tobacco products such as pan masala and mouth fresheners, had filed shipping bills dated 28 October 2024 for export of its consignments. Although the goods were exported, an alert issued by Customs resulted in their release on a provisional basis, subject to furnishing of bank guarantees. Samples drawn from the consignments were sent to the Central Revenues Control Laboratory (CRCL) for testing. CRCL issued test reports dated 24 December 2024 and 27 December 2024. According to the exporter, these initial reports did not raise any objection that would warrant reclassification of the goods or denial of export-related benefits. On the strength of these reports, the exporter sought finalisation of shipping bills and release of the bank guarantees furnished at the time of provisional clearance. However, the dispute escalated when, without any fresh sampling, a subsequent CRCL “clarification” dated 10 November 2025 was issued. This second report stated that the tested samples contained betelnut, nicotine, catechu, lime and flavouring substances, and concluded that each sample had the characteristics of “Gutka”, a chewing tobacco product. The report further observed that the samples were not pan masala or food preparations under the relevant food safety regulations. Relying on this second CRCL report, the Commissioner of Customs wrote to the GST Department on 5 February 2025 requesting that IGST refunds due to the exporter should not be processed or sanctioned. This effectively stalled refunds and continued the retention of bank guarantees, prompting the exporter to approach the High Court. The exporter argued that the first CRCL reports were binding and that the second report was legally untenable, having been issued without drawing fresh samples or providing any scientific reasoning for the drastic change in conclusion. It was further contended that repeated representations seeking release of bank guarantees had remained undecided, causing prolonged financial hardship. The exporter also highlighted that no show cause notice (SCN) had been issued till date, despite the serious allegations flowing from the second CRCL report The court observed that the report merely referred to an internal email of the Customs Department and did not explain why fresh findings were recorded without fresh sampling. The Bench also took note of the fact that representations seeking release of bank guarantees had neither been replied to nor decided by the Customs authorities, despite the passage of considerable time. Additionally, the absence of any show cause notice was viewed as a factor that could unjustifiably stall the exporter’s future shipments. Without entering into the merits of the classification dispute, the Court issued specific timelines to ensure administrative accountability. It directed that all representations seeking release of bank guarantees must be considered and a decision taken by the Commissioner of Customs on or before 28 February 2026. The Court further ordered that if Customs intended to issue any show cause notice, the same must be issued by 10 January 2026 and decided simultaneously along with the exporter’s representations. This, the Court noted, was necessary to prevent unnecessary disruption of the exporter’s ongoing and future business operations. The High Court clarified that it had not adjudicated on the merits of the classification issue or the validity of the CRCL reports at this stage. All rights, remedies and contentions of both sides were expressly kept open. Case Details Case Title: M/S Truespices India Inc Versus Union Of India & Ors. Case No.: W.P.(C) 18966/2025 Date: 17/12/2025 Counsel For Petitioner: Rahul Raheja Counsel For Respondent: Suhail Malik Click Here To Read Order Read More: Delhi High Court Declines to Interfere in GST Demand, Directs Taxpayer to Appellate Remedy Amid Pending Supreme Court Challenge

Customs to Decide on Bank Guarantee Release in Tobacco Export Dispute: Delhi HC Questions Second CRCL Report

Membership Required

Latest articles

Astronomy Coaching Is Not ‘Culture’; Denies Service Tax Exemption Under Mega Exemption Notification: CESTAT

Foreign Exchange Gain Must Be Treated as Operating Income for Transfer Pricing: ITAT

Bank Attachment Quashed as Madras HC Quashes GST Order Issued Against Deceased Person

ICAI’s Northern Regional Council Seeks Three-Month Extension for GSTAT Backlog Appeal Deadline, Cites Procedural Challenges

More like this

Astronomy Coaching Is Not ‘Culture’; Denies Service Tax Exemption Under Mega Exemption Notification: CESTAT

Foreign Exchange Gain Must Be Treated as Operating Income for Transfer Pricing: ITAT

Bank Attachment Quashed as Madras HC Quashes GST Order Issued Against Deceased Person

About us

Company

Categories