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2025 (5) TMI 1052 - HC - CustomsClassification of imported Roasted betel nuts - non-human consumption - seeking to set aside of the seizure memo and consequent release of the consignment - whether the goods would be used for human consumption or for industrial purposes - Petition filed under Article 226 of the Constitution - HELD THAT - The Court has heard the matter. The initial reports given by either the CRCL or the FSSAI do not say that the goods are not fit for human consumption. In fact in terms of the report dated 1st October 2024 the sample is found to be Roasted Areca Nuts by the primary laboratory. Thereafter the CRCL s report dated 17th October 2024 states that the sample is not fit for human consumption. Again on 25th October 2024 the parameters were held to not match with Roasted Areca Nut. These reports are in contrast with the report submitted in June/July 2024 where the CRCL itself had stated that the issue would be of moisture content and the damaged nuts exceeds the limit prescribed by FSSAI. Overall the reports are not consistent with each other. When the initial import was made clearly the FSSAI was of the opinion that the goods are Roasted Areca Nuts. It appears that there has been a deterioration of the product while the consignment has remained with the Customs or with the warehouse. The final report of the NFL which is the most recent report records clearly that there is some damage in the nuts caused by mould and insects and there could also be a musty odour. Thus this Court is of the opinion that the Roasted Areca Nuts have deteriorated during the entire process of repeated testing. Therefore no useful purpose would be served by continuing to leave the consignment with the Customs Department as the Petitioner is willing to give an undertaking that the same would not be used for human consumption. Accordingly the consignment is provisionally released subject to payment of a sum of Rs.5 lakhs as security with the Customs Department. The Customs Department after provisionally releasing the goods shall issue a Show cause notice to the Petitioner in accordance with law and adjudicate the matter. The Petitioner shall ensure that the said consignment of nuts is used for industrial purposes as has been represented to the Court. The Petition is disposed of in these terms.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include: (a) Whether the consignment of Roasted Areca Nuts imported by the Petitioner falls under the classification 'CTH 20081920' as per the Customs Tariff Act, 1975, and whether the advance ruling on classification is binding for the purpose of import clearance. (b) Whether the seizure of the consignment by Customs authorities and subsequent testing by the Food Safety and Standards Authority of India (FSSAI) and Central Revenue Control Laboratory (CRCL) was justified in light of conflicting test reports regarding the quality and fitness of the goods for human consumption. (c) The applicable regulatory framework under the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011, specifically the relevant sub-regulations governing Areca nuts, and the proper standard to be applied for testing. (d) Whether the consignment should be released unconditionally or provisionally, particularly considering the Petitioner's representation that the goods would be used for industrial purposes and not for human consumption. (e) The legal consequences and procedural requirements following provisional release of seized goods, including the issuance of a Show Cause Notice and adjudication by Customs. 2. ISSUE-WISE DETAILED ANALYSIS (a) Classification of Roasted Areca Nuts under Customs Tariff The Petitioner had obtained an advance ruling classifying the Roasted Areca Nuts under Customs Tariff Heading (CTH) 20081920, which covers "Other roasted nuts & seeds" under the First Schedule of the Customs Tariff Act, 1975. The ruling relied on precedents including a High Court of Madras judgment and an earlier Advance Ruling Authority decision from Mumbai, both of which classified roasted betel nuts similarly. The Court noted that the advance ruling was public and binding for the purpose of import classification. The Petitioner's bill of entry was filed accordingly. The seizure of the consignment was not disputed as being contrary to the classification, but rather related to the quality and safety of the goods. (b) Justification for Seizure and Conflicting Quality Reports The consignment was seized by Customs and sent for testing to FSSAI and CRCL due to concerns regarding moisture content, infestation by mould and insects, and overall fitness for human consumption. Initial reports were conflicting:
Due to these contradictions, the Court directed an independent inspection and sampling by FSSAI, with power to take samples for retesting. The National Food Laboratory (NFL), Ghaziabad, was directed to test the samples under the appropriate regulatory standards. (c) Applicable Regulatory Framework and Testing Standards The dispute included confusion about the applicable sub-regulations of the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011. FSSAI initially tested under Regulation 2.12, but later opined that sub-regulation 2.3.55, which specifically governs Areca nuts (betelnuts or supari), was the proper standard. The Court ordered testing under sub-regulation 2.3.55, emphasizing that the NFL must provide a report based on these standards. The NFL's final report concluded that the sample did not conform to the prescribed standards due to moisture, damaged nuts, presence of mould and fungus hyphae, and musty odour, rendering the sample substandard and unsafe under sections 3(1)(zx) and 3(1)(zz)(x)(xi) of the Food Safety and Standards Act, 2006. (d) Release of Consignment and Use for Industrial Purposes The Petitioner sought unconditional release of the consignment, representing that the goods would be used solely for industrial purposes and not for human consumption. The Department opposed unconditional release, citing lack of supervisory mechanisms to ensure non-human use and the delay in clearance causing deterioration of the goods. The Court noted that initial reports from FSSAI and CRCL did not conclusively state the goods were unfit for human consumption at the time of import. However, subsequent reports indicated deterioration during storage and repeated testing. Recognizing this, the Court found no useful purpose in continued detention and allowed provisional release subject to a security deposit of Rs. 5 lakhs, conditioned on the Petitioner's undertaking that the goods would not be used for human consumption. The Petitioner's undertaking was accepted as binding, with the Court warning that violation would amount to contempt and invite stringent action. (e) Procedural Consequences and Adjudication The Court directed that following provisional release, the Customs Department shall issue a Show Cause Notice to the Petitioner and adjudicate the matter in accordance with law. This ensures that the legal process for determination of any violations or penalties continues, preserving the Department's rights while balancing the Petitioner's interests. 3. SIGNIFICANT HOLDINGS The Court's reasoning and conclusions establish several important principles and determinations: "The initial reports given by either the CRCL or the FSSAI do not say that the goods are not fit for human consumption. In fact, in terms of the report dated 1st October, 2024, the sample is found to be 'Roasted Areca Nuts' by the primary laboratory." "The sample of Roasted Areca Nuts ... does not conform to the standards laid down under Regulation No. 2.3.55 ... as the sample shows Moisture, Damaged nuts and Damaged by mould & insects above the maximum prescribed limit ... The sample is thus substandard under section 3 (1) (zx) and unsafe under section 3 (1) (zz) (x) (xi) of FSS Act. 2006." "Overall, this Court is of the opinion that the Roasted Areca Nuts have deteriorated during the entire process of repeated testing." "No useful purpose would be served by continuing to leave the consignment with the Customs Department as the Petitioner is willing to give an undertaking that the same would not be used for human consumption." "The consignment is provisionally released subject to payment of a sum of Rs.5 lakhs as security with the Customs Department. The Customs Department, after provisionally releasing the goods, shall issue a Show cause notice to the Petitioner in accordance with law and adjudicate the matter." These holdings clarify that:
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