2025 (6) TMI 1291 - HC - Customs

Classification of imported Bovine Serum Albumin - to be classified under ITCHS Code 30039031 or under 35029000? - challenge to impugned order on the ground of violation of the principles of natural justice and also on the ground that the impugned order is a non-speaking order - HELD THAT - Though a non-speaking order with regard to the contentions of the petitioner which has been reiterated by the petitioner in this writ petition the first respondent has held that the consignment of Bovine Serum Albumin Standard imported by the petitioner vide the subject Bill of Entry dated 30.03.2024 has been rejected and the imported goods should be immediately be deported to the country of origin or destroyed at the petitioner s own cost under intimation to the first respondent. Being a order which drastically affects the right of the petitioner the first respondent should have passed a speaking order after adhering to the principles of natural justice. In case the petitioner is able to establish after having been afforded an opportunity of hearing that the consignment of Bovine Serum Albumin Standard imported by them has to be classified only under ITCHS Code 35029000 in which event there is no requirement for them to produce an advance Sanitary Import Permit (SIP) issued by Government of India before import. Since the impugned order is a non-speaking order with regard to the contentions of the petitioner and since the impugned order is an order passed by violating the principles of natural justice the impugned order has to be quashed and remanded back to the first respondent for fresh consideration on merits and in accordance with law after giving due consideration to the petitioner s contentions raised in this writ petition and after affording personal hearing to the petitioner. The impugned order dated 08.04.2024 passed by the first respondent is hereby quashed and the matter is remanded back to the first respondent for fresh consideration on merits and in accordance with law - Petition disposed off by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

a) Whether the consignment of "Bovine Serum Albumin" imported by the petitioner falls under ITCHS Code 35029000 or 30039031 for customs classification purposes;

b) Whether the first respondent was justified in rejecting the consignment on the ground that it required an Advance Sanitary Import Permit (SIP) issued by the Government of India, based on classification under ITCHS Code 30039031;

c) Whether the first respondent violated the principles of natural justice by passing the impugned order without affording the petitioner an opportunity of hearing;

d) Whether the impugned order is a non-speaking order and if so, whether that affects its validity;

e) The binding nature and applicability of the Customs Authority for Advance Ruling dated 05.02.2024, which classified the consignment under ITCHS Code 35029000;

f) The procedural propriety and correctness of the first respondent's direction to deport or destroy the consignment without considering the petitioner's contentions.

2. ISSUE-WISE DETAILED ANALYSIS

a) Classification of the consignment under ITCHS Code 35029000 or 30039031

The legal framework governing customs classification requires that imported goods be classified under the appropriate ITCHS (Indian Tariff Classification of Harmonized System) code for the purpose of customs duty assessment and regulatory compliance. The Customs Authority for Advance Ruling (CAAR) is empowered to provide binding rulings on classification to avoid disputes.

The petitioner relied on the CAAR ruling dated 05.02.2024, which clearly stated that "Bovine Serum Albumin" falls under ITCHS Code 35029000. This classification is significant because it exempts the consignment from the requirement of an Advance Sanitary Import Permit (SIP).

Contrarily, the first respondent classified the consignment under ITCHS Code 30039031, which mandates the production of an SIP before import. The first respondent's classification was communicated to the petitioner as early as 09.06.2022, indicating that the petitioner was aware of this stance.

The Court noted that the impugned order did not address or consider the CAAR ruling, which prima facie contradicts the first respondent's classification. The petitioner argued that the Customs Department alone is competent to classify imported goods, and the first respondent's order ignored this principle.

The Court found that the first respondent's classification was not supported by a reasoned order and conflicted with the earlier binding ruling by the CAAR, thereby raising serious questions about the correctness of the classification.

b) Requirement of Advance Sanitary Import Permit (SIP)

The necessity of an Advance Sanitary Import Permit depends on the correct classification of the imported goods. If the consignment falls under ITCHS Code 35029000, no such permit is required. However, classification under 30039031 triggers the SIP requirement.

The first respondent's rejection of the consignment was premised on the latter classification, thereby imposing the SIP condition. The petitioner contended that this requirement was wrongly imposed due to incorrect classification.

The Court observed that since the classification itself was under dispute and the petitioner's contention supported by CAAR ruling was not considered, the requirement for SIP could not be conclusively determined at this stage.

c) Violation of principles of natural justice

The principles of natural justice mandate that a person adversely affected by an order must be given a fair opportunity to be heard before such order is passed. The petitioner asserted that no hearing was granted prior to the impugned order, which directed deportation or destruction of the consignment.

The impugned order was silent on any hearing or consideration of the petitioner's submissions, rendering it a non-speaking order. The Court emphasized that such an order, which drastically affects the rights of the petitioner, must be preceded by a personal hearing and a reasoned order.

The absence of any indication of hearing or consideration of the petitioner's contentions amounted to a violation of natural justice.

d) Nature of the impugned order as a non-speaking order

The impugned order lacked any detailed reasoning or reference to the petitioner's arguments, including the CAAR ruling. The Court noted that a non-speaking order is generally impermissible when fundamental rights or interests are adversely affected.

The Court held that the first respondent should have passed a speaking order that addressed the petitioner's contentions and the relevant legal and factual matrix before arriving at a conclusion.

e) Binding nature and applicability of the Customs Authority for Advance Ruling

The CAAR ruling dated 05.02.2024 was brought on record by the petitioner to establish that the consignment falls under ITCHS Code 35029000. The Court observed that the first respondent failed to consider this ruling in the impugned order.

The Court recognized that the CAAR ruling is binding on the Customs Department and is the competent authority for classification. The failure to apply or even consider this ruling undermined the legality of the impugned order.

f) Procedural propriety and correctness of the first respondent's direction

The first respondent directed immediate deportation or destruction of the consignment at the petitioner's cost without affording an opportunity to contest the classification or the SIP requirement. The Court found this procedure to be flawed.

The Court held that before such drastic measures are ordered, the petitioner must be given a chance to be heard and the matter must be decided on merits with due consideration of all relevant documents and rulings.

3. SIGNIFICANT HOLDINGS

The Court held:

"The impugned order dated 08.04.2024 is a non-speaking order passed in violation of the principles of natural justice, as no opportunity of hearing was afforded to the petitioner and the contentions raised by the petitioner, including the binding Customs Authority for Advance Ruling dated 05.02.2024, were not considered."

"The classification of the consignment under ITCHS Code 30039031 by the first respondent is prima facie contrary to the binding ruling of the Customs Authority for Advance Ruling which classified the consignment under ITCHS Code 35029000."

"Since the classification is disputed and the impugned order is non-speaking and passed without hearing, it cannot stand and is liable to be quashed."

"The matter is remanded back to the first respondent for fresh consideration on merits and in accordance with law after affording a personal hearing to the petitioner."

"If the petitioner establishes that the consignment falls under ITCHS Code 35029000, there will be no requirement for an Advance Sanitary Import Permit (SIP) for import."

These holdings establish the core principles that:

• Classification of imported goods must be made by the competent Customs authority and prior binding rulings must be respected;
• Orders adversely affecting rights must be speaking orders and comply with principles of natural justice by affording hearing;
• Drastic measures like deportation or destruction cannot be imposed without due process;
• Disputes on classification and regulatory requirements must be resolved on merits after hearing the affected party.