The Madras High Court has quashed a customs seizure memo issued against an importer of Vital Wheat Gluten, holding that the Directorate of Revenue Intelligence (DRI) could not form the requisite “reason to believe” under Section 110 of the Customs Act, 1962 on the basis of a Public Notice that had already been suspended and contrary to settled judicial precedents.

The bench of Justice Hemant Chandangoudar directed the Customs Department to discharge and return the bank guarantee and indemnity bond furnished by the petitioner.

The central issue before the High Court was whether Vital Wheat Gluten imported by the petitioner qualified as “wheat flour” for the purpose of availing exemption from Basic Customs Duty under the Duty Free Import Authorisation (DFIA) Scheme.

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The petitioner was engaged in importing and trading food additives and food ingredients. In the ordinary course of business, it imported Vital Wheat Gluten under Bill of Entry No. 5680611 dated November 13, 2025.

For the import, the petitioner claimed exemption from Basic Customs Duty on the strength of DFIA No. 3411005881 dated December 30, 2024, which permitted duty-free import of wheat flour.

The dispute arose because the Customs authorities treated wheat gluten as distinct from wheat flour and questioned the availability of the DFIA benefit.

The DRI had initially issued a seizure notice dated November 17, 2025, which was challenged by the petitioner before the Madras High Court in W.P. No. 46271 of 2025.

By an order dated December 15, 2025, the Court directed the DRI to provide the petitioner with a personal hearing, consider its explanation challenging the proposed seizure, examine the judicial precedents relied upon by the petitioner and thereafter pass appropriate orders.

Following the hearing, the DRI issued the impugned seizure memo dated December 26, 2025, leading to the present writ proceedings.

The petitioner argued that the seizure action was principally founded on a Public Notice dated November 2, 2016, by which the Standard Input Output Norms (SION) relating to the export product “Biscuits” had been amended.

Under the amended norms, the expression “Maida/Atta/Flour” was to be read as “Wheat Flour” under ITC HS Code 11010000.

However, according to the petitioner, the same Public Notice had subsequently been suspended indefinitely on August 26, 2025. Since the import in question took place on November 13, 2025, the petitioner contended that the Public Notice was no longer operative on the date of import.

The petitioner therefore argued that the seizure memo could not legally be sustained when its foundational material had ceased to operate before the goods were imported.

A significant aspect of the case was that the question whether wheat gluten falls within the description of wheat flour for DFIA purposes was not a new or unsettled issue.

The petitioner relied upon earlier decisions of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and the Madras High Court holding that wheat gluten is covered by the expression “wheat flour” for the purposes of the DFIA Scheme.

Particular reliance was placed on the Madras High Court’s judgment in W.P. Nos. 17912 of 2023 etc., batch, dated October 15, 2025.

The petitioner also relied on a departmental Circular dated July 24, 2025, which clarified the circumstances in which technical correlation between imported inputs and exported products was required under the DFIA Scheme.

According to the petitioner, wheat flour and wheat gluten did not fall within paragraph 4.29 of the Foreign Trade Policy, 2023. Consequently, there was no requirement to establish technical correlation of their characteristics, quality and specifications in the manner contended by the department.

The Customs Department opposed the writ petition, maintaining that the petitioner was not entitled to the DFIA exemption.

The department relied on the November 2, 2016 Public Notice and argued that it recognised wheat flour, and not wheat gluten, for purposes of the exemption.

The department further contended that the seizure power under Section 110 of the Customs Act was based on the proper officer’s “reason to believe” that the goods were liable to confiscation. Ordinarily, according to the department, such a seizure should not be interfered with in writ jurisdiction unless there was procedural illegality or lack of jurisdiction.

The department also sought to distinguish wheat gluten from wheat flour on technical and commercial grounds. It submitted that wheat gluten is obtained by processing wheat flour through aqueous separation, removing starch and other constituents.

According to the department, wheat gluten could exist as moist gluten or dry gluten and constituted a value-added product having a substantially higher commercial value than wheat flour. While wheat flour enjoyed the relevant exemption, wheat gluten attracted customs duty at 30%, according to the department’s submission.

Justice Hemant Chandangoudar noted that the issue had already been considered by a Coordinate Bench of the Madras High Court in its judgment dated October 15, 2025.

The Coordinate Bench had examined CESTAT Ahmedabad decisions in Uni Colloids Impex Pvt. Ltd. v. Commissioner of Customs, Ahmedabad and Unibourne Food Ingredients LLP v. Commissioner of Customs, Mundra.

After examining technical literature and clarifications issued by the Ministry of Food Processing Industries and the Joint Director General of Foreign Trade, CESTAT had held that wheat gluten is nothing but wheat flour with specific technical characteristics and consequently qualified for the DFIA exemption.

The Tribunal had further observed that the issue had already been settled through earlier appellate orders that had attained finality and therefore could not simply be ignored by the adjudicating authority.

In Unibourne Food Ingredients LLP, CESTAT had reiterated that wheat gluten was covered by the description “wheat flour” for DFIA purposes. It had also held that the imported goods were not required to bear an ITC (HS) Code exactly corresponding to the code mentioned in the authorisation, provided the description, quantity and value requirements were satisfied.

The Madras High Court noted that the Coordinate Bench, after considering the CESTAT rulings, had concluded that wheat flour and wheat gluten fall under the same description for the purposes of the DFIA Scheme.

Consequently, proceedings initiated by Customs on the contrary assumption could not be sustained.

The Court also took note of an order dated July 14, 2021, passed by the Commissioner of Customs (Appeals-II), which, after considering the November 2, 2016 Public Notice, had held that wheat gluten was entitled to exemption under the DFIA Scheme. The petitioner submitted that the Commissioner’s order, the CESTAT decisions and the Coordinate Bench judgment had all attained finality, and the respondents did not dispute their existence.

One of the most important observations in the judgment concerns the statutory threshold for exercising seizure powers under Section 110 of the Customs Act, 1962.

The Court acknowledged that writ courts would ordinarily be slow to interfere with a seizure under Section 110. However, the power of seizure can be exercised only when the proper officer has a legally sustainable “reason to believe” that the goods are liable to confiscation.

Such belief, the Court stressed, must be founded on relevant and legally sustainable material. It cannot be based on material that has ceased to have legal force or on a position contrary to binding judicial decisions.

This principle proved decisive in the present case.

The Court found that the respondents had proceeded on the assumption that wheat gluten was different from wheat flour and consequently did not qualify for DFIA benefits.

However, that very issue had already been decided by CESTAT, affirmed by the Coordinate Bench of the High Court and accepted by the Commissioner of Customs (Appeals-II).

The respondents had not placed any material before the Court showing that those decisions had been stayed or set aside.

More importantly, the principal basis for the seizure memo was the Public Notice dated November 2, 2016, which had admittedly been suspended on August 26, 2025, before the petitioner’s import on November 13, 2025.

The Court held that once the Public Notice had been suspended, it ceased to operate prospectively. The Customs authorities therefore could not rely upon that suspended Public Notice to form the necessary belief that the imported goods were liable to confiscation.

The Court also found significance in the July 24, 2025 departmental Circular.

According to the judgment, the Circular clarified that in cases of the present nature there was no requirement to establish technical correlation between the imported goods and the export product.

Thus, even the department’s own Circular did not support the position adopted by the respondents in the seizure proceedings.

The High Court made an important distinction between the commercial characteristics of the products and the legal question arising under the DFIA Scheme.

The Court observed that the issue was not whether wheat gluten was commercially different from wheat flour or whether the two products attracted different rates of customs duty.

The real question was whether wheat gluten fell within the description of the input permitted under the DFIA Scheme.

Once that question had already been settled by judicial decisions and the applicable policy framework, the commercial differences between the two products became irrelevant for deciding the petition.

The High Court concluded that there was no legally sustainable material before the DRI officer to form the requisite “reason to believe” that the imported goods were liable to confiscation.

As a result, the assumption of jurisdiction under Section 110 of the Customs Act was held to be unsustainable.

The Court accordingly held that the seizure memo dated December 26, 2025 could not be sustained.

The Court further recorded that the original exporter, Koshambh Multitred Pvt. Ltd., had validly transferred the DFIA authorisation in favour of the petitioner.

The transferred authorisation specifically permitted import of, among other items, wheat flour under ITC HS Code 11010000.

The Court considered this fact along with the binding CESTAT decisions, the Coordinate Bench judgment, the Commissioner of Customs (Appeals-II) order, the July 24, 2025 Circular and the suspension of the Public Notice relied upon by Customs.

Allowing the writ petition, the Madras High Court quashed the seizure memo dated December 26, 2025.

The Court further directed that the bank guarantee furnished by the petitioner in favour of the Customs Department stand discharged. The second respondent was directed to return the original bank guarantee and indemnity bond to the petitioner within two weeks from the date of receipt of a copy of the order.

The connected miscellaneous petitions were closed and there was no order as to costs.

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