The Bombay High Court has quashed three orders rejecting an importer’s applications for registration of irrevocable ICLCs over a mismatch in ITC(HS) codes, holding that the importer should have been given an opportunity to explain the discrepancy before rejection.
The Bench of Justice M. S. Karnik and Justice Sandesh D. Patil directed the Directorate General of Foreign Trade (DGFT) to reconsider the applications afresh after granting a personal hearing. The order was passed on November 4, 2026, in a petition filed by Prime Polychem Private Limited.
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The company challenged three orders dated September 14, 2026, rejecting its applications for registration of irrevocable ICLCs.
The rejection arose because the ICLCs mentioned ITC(HS) Code 39041090, whereas the registration applications declared ITC(HS) Code 39041020. The authority treated this mismatch as a ground for rejection under Notification No. 25/2026-27 dated July 24, 2026.
The petitioner maintained that it had complied with the deficiency letters issued by the authority and furnished the documents and particulars sought. However, none of those letters had identified the code mismatch or called upon the company to explain it.
According to the petitioner, the applications were ultimately rejected solely on this ground without a show cause notice or an opportunity to reconcile the discrepancy.
Dr. Sujay Kantawala, the counsel for the company, submitted that it had consistently declared the goods in its registration applications as Suspension Grade PVC Resin under ITC(HS) Code 39041020. It argued that it had neither concealed the nature of the goods nor attempted to misdescribe them.
Explaining the different code in the documents, the petitioner claimed that the Thailand Department of Foreign Trade’s export processing system did not recognise or provide HS Code 39041020.
Consequently, its foreign supplier had selected HS Code 39041090 as the closest and most appropriate available classification reflecting the product.
The petitioner characterised the mismatch as a curable documentary discrepancy rather than a basis for outright rejection. It expressed willingness to provide further information or documents to reconcile the foreign supplier’s documentary reference with the Indian classification declared in its applications.
This explanation appeared in Ground H of the petition, which the company’s counsel specifically relied upon before the Court.
Counsel appearing for respondent Nos. 4 and 5 defended the rejection orders, submitting that they were speaking orders because they expressly identified the mismatch between the codes mentioned in the ICLCs and those declared in the applications.
Relying on Notification No. 25/2026-27 dated July 24, 2026, the respondents urged the Court to dismiss the petition.
However, counsel also informed the Bench that the Customs Department had no independent objection to clearance of the consignments, having regard to the stand taken in its affidavit-in-reply.
The goods remained uncleared solely because the mandatory registration certificate from the DGFT had not been produced or issued.
A request was also made for additional time to file an affidavit-in-reply on behalf of the DGFT. The Court considered it unnecessary to grant further time in the circumstances.
The High Court held that the rejection orders warranted interference because the ground relied upon had not been brought to the petitioner’s attention with an opportunity to respond.
The Bench noted that the explanation contained in Ground H demonstrated that the petitioner had a response to offer regarding the discrepancy. An opportunity should therefore have been provided before the applications were rejected.
The ruling addresses the failure to give the importer an opportunity to explain the deficiency. The Court did not conclusively accept the explanation concerning the Thai export processing system or determine the correct tariff classification. Those issues remained for consideration by the DGFT.
The High Court quashed all three rejection orders dated September 14, 2026, identified as Exhibits DD-1, DD-2 and DD-3 to the petition.
It directed the DGFT to reconsider the registration applications afresh in accordance with law and grant the petitioner a personal hearing to present its explanation.
The company was directed to appear before respondent No. 3 on November 11, 2026, at 11:00 a.m., along with its explanation.
The authority must pass appropriate orders within seven days of the petitioner’s appearance and communicate its decision to the company.
The Bench further clarified that, upon obtaining appropriate orders, the petitioner could take appropriate recourse for clearance of the goods from the Customs Authority. The writ petition was accordingly disposed of.
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