2025 (12) TMI 906 - HC - Customs

Authority told to decide bank guarantee release, issue SCN promptly, avoid holding exporters' shipments amid gutka dispute

HC, in writ jurisdiction, declined to itself order release of bank guarantees furnished by Petitioner-exporters in relation to disputed classification of ... Finalization of shipping bills on the basis of the first test report instead of the second test report - no fresh samples of the goods were drawn and no reasoning has been given as to why such a finding has been arrived at, that the products of the Petitioners were Gutka - seeking release of the bank guarantees and withdrawal of the letters issued to the GST Department - HELD THAT:- In the opinion of this Court, for the release of the bank guarantees, the Petitioners have made several representations to the Commissioner of Customs. These representations have neither been replied to nor decided till date - Moreover, the circumstances which warranted the issuance of second CRCL reports are completely unknown and it does not specify as to why the same were issued. The second CRCL reports refer to an email of the Customs Department dated 07th November, 2025. The matter deserves to be considered by the Commissioner of the Customs in a holistic manner and the representations for release of the bank guarantees deserve to be decided on an early date - Further, it is also noticed that no Show Cause Notice has been issued to the Petitioners. If any SCN is to be issued to the Petitioners, the same ought to be done expeditiously so that further shipments of the Petitioners are not unnecessarily put on hold. All the representations of the Petitioners shall now be considered and the decision on the release of bank guarantees shall be taken by 28th February, 2026 by the Commissioner of Customs - If any SCN is to be issued, the same shall be issued by 10th January, 2026 and the same shall also be decided simultaneously with the representations of the Petitioner. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the clarification issued in the second CRCL reports, without drawing fresh samples or disclosing reasons, could be acted upon for treating the goods as 'Gutka' and for consequential action including withholding IGST refunds. 1.2 Whether the inaction of the customs authorities in deciding the petitioners' representations for finalisation of shipping bills and release of bank guarantees was lawful, and what directions were warranted. 1.3 Whether, in the absence of any issued show cause notice, the customs authorities were required to adhere to a time-bound schedule for issuance and adjudication of such notice in relation to the concerned consignments. 2. ISSUE-WISE DETAILED ANALYSIS 2.1 Effect of second CRCL reports and absence of reasons/fresh sampling Interpretation and reasoning 2.1.1 The Court noted that initial CRCL test reports (first CRCL reports) dated 24.12.2024 and 27.12.2024 recorded the physical and chemical characteristics of the products and did not contain any adverse conclusion categorising the goods as 'Gutka'. 2.1.2 The Court further noted that, without drawing any fresh samples, the CRCL later issued 'clarification' reports dated 10.11.2025 (second CRCL reports) opining that the tested samples had the characteristics of 'Gutka', a chewing tobacco product as per IS 10335:2016, and that the samples were other than Pan Masala, Khaini and Surti, and not 'food preparation' under Section 2.3.4 of the Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations, 2011. 2.1.3 The Court observed that the circumstances necessitating issuance of the second CRCL reports were 'completely unknown' and that these reports did not specify why they were issued or provide reasoning for altering the conclusion, apart from referring to an email of the Customs Department dated 07.11.2025. 2.1.4 While noting the petitioners' contention that the first CRCL reports were binding and that the second CRCL reports, being unreasoned and unsupported by fresh sampling, were untenable, the Court expressly refrained from adjudicating on the merits of this challenge in writ jurisdiction at this stage. Conclusions 2.1.5 The Court did not decide the legality or evidentiary value of the second CRCL reports on merits; it left all rights and contentions of the parties open for appropriate proceedings, including any show cause notice and adjudication before the customs authorities. 2.2 Non-disposal of representations and release of bank guarantees Interpretation and reasoning 2.2.1 The Court recorded that, at the time of provisional release of the goods, the petitioners had furnished bank guarantees and bonds, and that, after receipt of the first CRCL reports showing no objection, the petitioners had submitted several representations seeking finalisation of shipping bills and release of bank guarantees. 2.2.2 The Court found that these representations had neither been replied to nor decided by the Commissioner of Customs, despite the passage of time and despite the provisional nature of the release. 2.2.3 The Court held that the matter requires consideration by the Commissioner of Customs 'in a holistic manner', including the effect of the first and second CRCL reports, and that the petitioners are entitled to a time-bound decision on their pending representations relating to release of bank guarantees. Conclusions 2.2.4 The Court directed that all representations of the petitioners regarding release of bank guarantees be considered, and a decision on release of the bank guarantees be taken by the Commissioner of Customs on or before 28.02.2026. 2.2.5 The Court did not itself order release of the bank guarantees or finalisation of shipping bills, but confined itself to directing a prompt, reasoned administrative decision. 2.3 Necessity and timeline for issuance and adjudication of show cause notice Interpretation and reasoning 2.3.1 The Court noted that no show cause notice (SCN) had been issued to the petitioners till the date of hearing, despite the existence of CRCL reports and the provisional nature of the release. 2.3.2 The Court considered that, if the Department intended to take any adverse action, an SCN ought to be issued expeditiously so that subsequent shipments of the petitioners are not 'unnecessarily put on hold'. 2.3.3 The Court therefore treated the matter as requiring time-bound initiation and completion of adjudicatory proceedings, to ensure certainty and avoid prolonged provisional status or indefinite administrative restraint, including on GST refunds. Conclusions 2.3.4 The Court directed that, if any SCN is to be issued, it must be issued on or before 10.01.2026. 2.3.5 The Court further directed that any such SCN be adjudicated 'simultaneously' with the petitioners' representations for release of bank guarantees, and that the adjudication be completed within the same outer limit of 28.02.2026. 2.3.6 The Court clarified that it has not examined the merits of any prospective SCN, and that all rights and contentions of both sides are preserved for such proceedings.