SCN For Customs Duty Payment Invalid Without Finalisation of Provisional Assessment: Karnataka HC Orders Release of Areca Nuts

The Karnataka High Court has ordered the release of areca nuts and held that the show cause notice (SCN) issued under Section 28 of the Customs Act, 1962 issued for the payment of duties, interest, etc. is invalid without finalisation of provisional assessment. The bench of Justice S.R.Krishna Kumar has observed that even if provisional assessments were to be resorted to under Section 18, they would necessarily have to be finalised in terms of Section 18 before a proceeding under Section 28 can be commenced by the respondents. The definition of relevant date found in Explanation 1(b) to Section 28 also provides that the time period for issuing show cause notice under Section 28 would arise from the date of adjustment of duty after final assessment in cases covered under Section 18. The bench has noted that provisional assessments are still continuing as per the stance of the respondents themselves, it was impermissible in law to issue the impugned SCN under Section 28, thereby leading to the sole conclusion that the impugned SCN was clearly illegal, invalid, premature and contrary to the provisions of the Customs Act and the impugned SCN and all further proceedings thereto deserve to be quashed as a consequence of which even the continuation of the confiscatory proceedings is impermissible and unsustainable in law, especially when it is concluded that the subject goods being roasted areca nuts are not prohibited and therefore, the question of confiscating them will not arise in the facts and circumstances of the instant case. The petitioner imported roasted areca nuts in August 2024 and filed a Bill of Entry on September 6, 2024, declaring the goods under tariff entry 20081920, which covers processed food items. The consignment was initially tested by the Central Revenues Control Laboratory (CRCL), which confirmed that the goods were roasted areca nuts. However, a second test conducted by ICAR-CPCRI raised doubts, suggesting that the samples resembled raw dried areca nuts. Based on this conflicting report, customs authorities proceeded to seize the goods in December 2024 under Section 110 of the Customs Act, alleging violation of import policy provisions. Subsequently, the department issued a show cause notice demanding over ₹1.6 crore, reclassifying the goods under Chapter 8 (CTH 08028090), which attracts stricter import restrictions. The authorities also alleged that the goods were “prohibited” under applicable notifications and liable for confiscation, along with penalties and interest. The petitioner challenged these actions, arguing that the initial CRCL report clearly classified the goods as roasted areca nuts. The classification under Chapter 20 was correct and more specific. The reclassification under Chapter 8 was arbitrary and contrary to settled principles of tariff interpretation. The transaction value declared in the invoice was never disputed by the authorities. During the pendency of proceedings, the High Court directed retesting by CRCL, which reaffirmed its earlier finding that the goods were indeed roasted areca nuts with low moisture content. Meanwhile, changes in import policy further complicated the matter. Notifications issued in April and October 2025 introduced new conditions and restrictions, including minimum import price thresholds and classification changes. The petitioner contended that these subsequent policy changes could not be applied retrospectively to imports made in September 2024. The Court identified four issues for determination: Whether the provisional assessment conducted by customs authorities complied with statutory requirements. Whether the reclassification of goods from Chapter 20 to Chapter 8 was legally sustainable. Whether the valuation adopted by the authorities was valid. Whether the show cause notice and subsequent proceedings warranted judicial interference. A crucial aspect noted by the Court was the manner in which the customs authorities altered the status of the Bill of Entry. Initially marked as “final,” it was later converted into “provisional” several months after filing, without clear adherence to statutory provisions governing provisional assessment. The Court also examined whether the procedure under Sections 17 and 18 of the Customs Act—relating to self-assessment and provisional assessment—had been properly followed. The petitioner argued that no speaking order was issued for reassessment and that due process was not complied with. The petitioner relied on several Supreme Court judgments to argue that transaction value cannot be rejected without following due procedure under the Customs Valuation Rules. It was emphasized that there was no allegation of undervaluation. The declared invoice value should be accepted unless validly challenged. Import policy restrictions do not determine valuation under customs law. The court directed the department to release the subject imported goods in favour of the petitioner within a period of 7 days from the date of receipt of a copy of this order by adopting the classification and valuation adopted by the petitioner and as the petitioner - importer has already filed the FSSAI reports, which would be sufficient compliance for the said purposes. The court directed the department to issue a certificate of waiver of demurrage, detention and ground rent charges in favour of the petitioner within a period of seven days. Case Details Case Title: M/S Vaibhav International Versus The Commissioner Of Customs Citation: JURISHOUR-606-HC-2026(Kar) Case No.: WRIT PETITION NO. 33823 OF 2024 (T-CUS) Date: 09/03/2026 Counsel For Petitioner: Kiran S. Javali And Sri. V. Raghuraman, Senior Counsels Counsel For Respondent: Aravind Kamath, ASG Click Here To Read Order Read More: ITC Fraud | GST Dept. Passed Order Without Considering Assessee’s Reply To SCN: P&H HC Quashes Bank Account Freezing

SCN For Customs Duty Payment Invalid Without Finalisation of Provisional Assessment: Karnataka HC Orders Release of Areca Nuts

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