The Punjab and Haryana High Court has directed the Customs authorities to release consignments of imported roasted areca nuts, holding that continued withholding of the goods could not be justified when the Central Revenue Control Laboratory (CRCL) had based its conclusion primarily on the physical appearance of the samples rather than other scientific parameters.
The bench of Acting Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor has directed that the physical delivery of the goods declared fit for consumption should be ensured within a fortnight after furnishing the personal bond.
The petitions concerned imported roasted areca nuts from Indonesia that had remained in a Customs bonded warehouse amid a dispute over whether the goods should be classified as “roasted” or “dried” areca nuts, which attracted different rates of customs duty.
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According to the petitioner-company, the consignments consisted of roasted areca nuts imported from Indonesia. The importer was willing to pay the applicable customs duty, but the Customs authorities took the view that the goods were actually “dried” areca nuts rather than roasted areca nuts.
The classification dispute had significant consequences because the two descriptions attracted different rates of customs duty. As a result, the imported goods remained in the bonded warehouse from November 2024 onwards, leading the importer to approach the High Court seeking their release.
The Customs authorities relied upon a test report issued by the Central Revenue Control Laboratory, New Delhi. The report described the sample as roasted areca nuts but ultimately opined that, on the basis of its physical appearance, the sample could not be considered roasted areca nuts and was instead to be treated as dried areca nuts.
The Court examined the testing parameters contained in the laboratory report as well as the Standard Operating Procedure (SOP) applicable to testing of areca nuts.
The test report recorded moisture content at 2.37% by mass, damaged nuts as nil, damaged by moulds and insects at 9.97%, total ash at 1.62%, and the presence of arecoline. Aflatoxin was recorded as below detection level, while Salmonella, Listeria monocytogenes and Vibrio cholerae were reported absent.
The SOP placed before the Court prescribed separate parameters and testing methods for roasted, dried, raw and scented areca nuts. Among the parameters were moisture, damaged nuts, mould and insect damage, aflatoxin, heavy metals and microbiological characteristics. The prescribed maximum moisture level was 7% by mass.
The High Court noted that the laboratory’s conclusion that the goods were dried rather than roasted was essentially founded on their physical appearance and colour. The sample was described as brown in colour, which the authorities treated as indicative of dried areca nuts.
A key aspect of the ruling was the Court’s observation that the laboratory report did not appear to determine the nature of the product on the basis of a broader set of scientific parameters.
The Bench observed that, when the CRCL report was examined against the parameters contained in the relevant SOP, there was no clear scientific basis, apart from physical appearance, for concluding that the imported product was not roasted areca nuts.
The Court also took note of the petitioner’s reliance on a private laboratory report, according to which the imported consignments were roasted areca nuts. The specific assertion made by the petitioner in this regard remained unrebutted.
Importantly, the Court noted that the moisture content recorded in the laboratory reports was below the 7% permissible limit, which was a significant parameter in determining the nature of the product in such cases.
The Court also considered the conduct of the Customs authorities in relation to earlier consignments.
The respondents had themselves released four consignments of areca nuts on furnishing of personal bonds. The Customs authorities explained that those consignments had been provisionally assessed while verification reports were awaited and were subsequently given “out of charge.”
The Court found that the petitioner had been importing such products for several years and that four consignments had already been released on similar terms.
The Revenue attempted to distinguish those consignments on the ground that the issue in those cases related to determination of country of origin, whereas the roasted nature of the imported goods was not disputed.
However, the Court observed that the test reports concerning the earlier released consignments and the consignments involved in the present proceedings were similar in an important respect—the moisture content, described by the Court as a major determinative factor in such matters, was below 7%.
The High Court made it clear that it was not finally determining whether the goods were roasted or dried areca nuts.
Show-cause notices had already been issued to the petitioner, and proceedings concerning determination of the appropriate customs duty were pending. The Bench held that expressing a final opinion on the merits at this stage could prejudice those proceedings.
Accordingly, the Court deliberately refrained from adjudicating the ultimate classification and customs-duty liability. The question of what import duty was payable would have to be decided in the appropriate proceedings initiated by the Customs authorities.
The petitioner had also challenged the delay in furnishing the laboratory report.
Reliance was placed on the Food Safety Standards (Import) Regulations, 2017, under which the petitioner contended that test reports concerning food items were required to be furnished by the laboratory within five days.
In the present case, according to the petitioner, the reports were supplied nearly a month later.
The petitioner argued that the prolonged detention of the imported goods had caused serious hardship and that laboratory reports based essentially on physical appearance could not justify keeping the consignments detained for an extended period.
The Court, however, did not find it necessary to finally determine these issues because the underlying classification and duty dispute was already the subject matter of appropriate proceedings.
The High Court allowed the petitions and directed the concerned respondents to release the imported consignments of roasted areca nuts forthwith upon the petitioner’s furnishing of a personal bond.
The release, however, was made subject to the outcome of the proceedings already initiated for determining the customs duty payable by the importer.
As regards the two consignments which the respondents themselves had found to be roasted areca nuts and which had remained withheld for about eight months, the Court directed that those consignments too be physically released in accordance with law.
The Court did not bring the customs adjudication to an end. Instead, it balanced the interests of the importer and the department by permitting release of the goods while preserving the Customs authorities’ power to determine the applicable duty in the pending proceedings.
The petitioner was directed to submit its reply to the show-cause notice within four weeks. Thereafter, the respondents were directed to fix a specific date for hearing and were left free to pass appropriate orders in accordance with law.
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