The Madras High Court has upheld the requirement of substantial pre-deposit in a customs dispute involving alleged misuse of a duty-free import scheme for areca (betel) nuts, while dismissing appeals filed by the importer and its partners for failure to comply with the condition.
The Bench of Justice G. Jayachandran and Justice R. Sakthivel affirmed the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which had directed the firm to deposit ₹10 crore and ₹10 lakh each by its partners as a condition for hearing their appeals.
The dispute arose from imports of areca nuts by the Delhi-based firm under Notification No. 32/1997, which allows duty-free imports for job work, subject to strict conditions including re-export of processed goods within a stipulated time. The importer had claimed that the areca nuts were processed into “betel nut tannin” and exported back to the supplier.
However, investigations by the Customs Department revealed that large quantities of imported areca nuts—spread across 144 consignments valued at approximately ₹19.8 crore—were allegedly diverted for manufacturing pan masala and gutka in the domestic market instead of being used for export-oriented job work.
Authorities further alleged manipulation of records, including claiming excessive wastage (up to 80%) without proof of destruction. Use of incorrect export scheme codes to avoid scrutiny. Creation of parallel invoices to falsely show export compliance
Based on these findings, a demand of over ₹20.12 crore in customs duty was raised along with interest, confiscation of goods, and imposition of equivalent penalty under Section 114A of the Customs Act.
When the matter reached the CESTAT, the Tribunal refused to grant waiver of pre-deposit, citing lack of evidence supporting the importer’s claims and the serious nature of the allegations. It directed the firm to deposit ₹10 crore and the partners ₹10 lakh each.
The appeals were subsequently dismissed when the appellants failed to comply with this pre-deposit requirement.
The High Court upheld the Tribunal’s decision, noting that the direction to deposit 50% of the duty demand was reasonable given the gravity of the alleged violations and the evidence collected during investigation.
Rejecting the importer’s argument that earlier relief granted in similar matters should apply, the Court clarified that the facts in the present case were materially different, involving detailed investigation and substantial incriminating material.
On the issue of limitation, the Court held that the extended period under Section 28(4) of the Customs Act was rightly invoked due to wilful suppression and misstatement of facts. The use of incorrect export codes and consistent misdeclaration could not be treated as mere clerical errors but pointed to deliberate intent to evade duty.
The Court also dismissed reliance on any alleged clean chit from the Directorate of Revenue Intelligence (DRI), observing that DRI findings do not override the jurisdiction of Customs authorities in matters of duty assessment and enforcement.
The High Court dismissed all three appeals filed by the importer and its partners, holding them devoid of merit and affirming both the pre-deposit requirement and the Tribunal’s dismissal of appeals for non-compliance.
Case Details
Case Title: M/s A.P.P.Enterprises Versus The Commissioner of Customs (Seaport-Export)
Citation: JURISHOUR-1071-HC-2026(MAD)
Case No.: C.M.A.Nos.1162 to 1164 of 2014
Date: 29.04.2026
Counsel For Petitioner: Dhanamadhiri
Counsel For Respondent: Rajnish Pathiyil
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