2024 (3) TMI 704 - HC - Customs

Imported menthol scented betel nuts cleared for release despite kernel husk fragments found natural

Neena Uppal Versus The Union of India through, The Secretary, Department of Revenue Ministry of Finance, New Delhi, The Commissioner of Customs (NS-1) Raigad, The Deputy Commissioner of Customs (NS-I), Gr. I & IA Maharashtra.

Bombay HC allowed petition seeking release of imported betelnuts/supari described as Menthol Scented Sweet Supari. FSSAI test report confirmed goods as ... Seeking release of the goods imported - betelnuts/supari described as Menthol Scented Sweet Supari (“goods”) - nature of the mix created - FSSAI issued test report Split Areca Nut with mild smell of Menthol and confirmed to FSSAI standards (Exhibit ‘H’) - DYCC - presence of kernel husk fragments - classification of confirmed to be falling under CTH 21069030 - HELD THAT:- From the materials on record, there was no reason for the Respondents to discard the opinion as rendered by the FSSAI so as to take a stance not to clear the goods for home consumption. In our opinion, there was also no reason for the Respondents to disown or read into the report of the DYCC as to what has actually not been provided, namely, that there are impurities in the goods much less harmful. With the assistance of the learned counsel for the parties, we examined the issue as to what is the purport of the DYCC’s report when it uses the words “that the samples u/r contain pieces of kernel husk fragments”. It appears from the material furnished before us by the learned counsel for the parties, and which ought not to be in dispute that the “kernel husk” is the hard (brown) portion of a coconut, the particles of which may get mixed when the kernel (white edible portion inside the coconut) is grated. If the grating in a given case is little deep, it is likely that the actual kernel is mixed with the particles of the hard portion (skull of the coconut) which holds the kernel. It is also likely that some strings of the outer husk of the kernel (literally “the dry fiber part of the coconut”) can also be described to be kernel husk. Thus, we do not find that there is any objectionable or any fatal impurity which would render the goods to be labelled as prohibitory. In our opinion, the respondents ought not to have taken such a decision that the goods should not be granted a clearance and/or a situation is brought about that they do not conform, to the opinion as rendered by the CAAR. In our view, in the facts of the present case, accepting such stand, as taken on behalf of the respondents would certainly render nugatory, the ruling of the CAAR, as also the report of the FSSAI and the DYCC. Such stand of the department thus, cannot be sustained. The Petition is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether goods classified earlier by the Advance Ruling Authority and finally assessed under the same tariff heading can be refused clearance for home consumption by the Customs authorities on the basis of a departmental chemical analysis that, in interpretation, alleges non-conformity. 2. Whether a post-assessment risk / safety examination (FSSAI test and DYCC chemical analysis) can justify withholding clearance where the statutory food-safety authority has issued a favourable conformity opinion under the applicable regulation. 3. Whether the presence of kernel husk fragments or the observation that the product 'may not be ready to use' in a DYCC report constitutes objectionable or prohibitory impurity sufficient to negate the Advance Ruling and FSSAI conformity and bar release (including provisional release on acceptance of Provisional Duty bond without security). 4. Whether the departmental interpretation of analytical observations, when not explicitly recording prohibited contamination or harmful impurity, can be read into the report to defeat prior administrative rulings and statutory conformity opinions. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Effect of Advance Ruling and Final Assessment vs. Subsequent Departmental Refusal Legal framework: Section 28H (Advance Ruling provisions) and the Customs assessment regime under the Customs Act, 1962 govern pre-import classification and assessment; administrative consistency requires that classification and assessment stand unless valid reason to revisit on legal grounds exists. Precedent Treatment: The Court relied on the principle that administrative rulings and final assessments are to be given effect to, subject to material contrary evidence; no specific earlier case law was invoked to displace the Advance Ruling in the present record. Interpretation and reasoning: The Court noted undisputed antecedents - an Advance Ruling classifying the goods under CTH 21069030 and a final assessment consistent with that ruling. The respondents adduced no material showing a legally cognisable ground to overturn the ruling/assessment. Administrative attempts to re-characterise the goods without categorical evidence that they fall outside the ruling were held to be unjustified. Ratio vs. Obiter: Ratio - An Advance Ruling and a consistent final assessment create a legitimate expectation and administrative status that cannot be negated by speculative departmental interpretation in absence of concrete contrary findings. Conclusions: The respondents could not refuse clearance on the basis advanced; the petitioners were entitled to relief to give effect to the Advance Ruling and final assessment. Issue 2 - Role of FSSAI Conformity Opinion vis-à-vis DYCC Report Legal framework: Food Safety and Standards Regulations (Regulation 2.3.55) set descriptive and quantitative standards for arecanuts/betelnuts; FSSAI is the statutory authority for food-product standards. Precedent Treatment: The Court treated the FSSAI opinion as carrying statutory weight on edible conformity; no prior authorities were overruled or distinguished. Interpretation and reasoning: The FSSAI report (sample-tested) expressly stated conformity to Regulation 2.3.55. The departmental DYCC report, while noting kernel husk fragments and that the product 'may not be ready to use,' did not record any contravention of the Regulation's parameters (e.g., off-flavour, insect infestation, mould, synthetic colouring, moisture/damage thresholds) nor indicate prohibited or harmful contaminants. The Court held that, in this factual matrix, the FSSAI opinion could not be discarded absent a clear, contrary finding of statutory non-conformity. Ratio vs. Obiter: Ratio - A favourable statutory food-safety conformity opinion cannot be displaced by a departmental technical report that does not identify a violation of the statutory standards; the administrative outcome must respect the statutory authority's findings. Conclusions: The FSSAI conformity opinion mandated clearance for home consumption unless the DYCC report established explicit non-conformity with the Regulation, which it did not. Issue 3 - Legal Significance of 'Kernel Husk Fragments' and 'May Not Be Ready to Use' Observations Legal framework: Interpretation of analytical reports must be anchored to statutory standards and to whether an observation equates to a legally cognisable impurity/prohibition under applicable regulations and customs law. Precedent Treatment: The Court applied standard interpretative principles to technical reports and did not rely upon or displace prior authority; it emphasized practical and technical understanding of sample descriptors. Interpretation and reasoning: The Court examined the literal and practical meaning of 'kernel husk' and found it to be a non-objectionable, naturally occurring hard portion/outer fibre of coconut kernel that might be present from processing/grating. The DYCC's note that the product 'may not be ready to use' was not equivalent to a finding of harmful impurity, adulteration, or prohibited content. The respondents' affidavit, which construed those observations as 'impurities,' read into the DYCC report a conclusion it did not state. The Court held such a construction was unsustainable; absence of explicit harmful contamination or statutory non-conformity meant the observation could not justify withholding clearance. Ratio vs. Obiter: Ratio - Technical descriptors in departmental chemical reports must be interpreted in context; presence of non-prohibitory fragments or a statement that a product 'may not be ready to use' does not automatically amount to legally objectionable impurity unless it translates into breach of the statutory standards. Conclusions: The kernel husk fragments and 'may not be ready to use' observation did not amount to a ground for refusal; the departmental characterization of those observations as impurities was unjustified. Issue 4 - Administrative Duty to Give Effect to Statutory/Expert Opinions and Limits of Departmental Re-interpretation Legal framework: Principles of administrative law require reasoned decision-making and fidelity to statutory expertise; departments must not nullify expert statutory opinions without cogent, contrary material. Precedent Treatment: The Court applied established administrative-law norms (legitimate expectation, reasoned basis for divergent action) though no distinct precedent was cited. Interpretation and reasoning: Accepting the respondents' stance would render the CAAR ruling and FSSAI report nugatory. The Court emphasized that an administrative body cannot, by selective or strained interpretation of a technical report, defeat prior statutory determinations. The DYCC report did not supply the cogent contrary material necessary to justify such a departure. Ratio vs. Obiter: Ratio - Administrative authorities must act consistently with prior statutory/technical determinations unless they place on record clear, material, and relevant contrary findings; mere speculative or interpretative assertions are insufficient. Conclusions: The respondents' refusal to clear the goods could not be sustained; provisional release and reliefs ordered in favour of the importer were appropriate given the absence of material showing statutory non-conformity. Remedial Conclusion and Order (Legal Effect) Conclusion: The petition was allowed; the Court directed release in terms prayed (including issuance of detention certificate if applied), holding that the Advance Ruling, final assessment and FSSAI conformity could not be negatived by the departmental reading of the DYCC report which lacked explicit findings of statutory non-conformity. The decision to withhold clearance was quashed.