Indu Shekhar Vs Union of India & Anr. (Bombay High Court)
The Bombay High Court, in the case of Indu Shekhar Vs Union of India & Anr., granted an interim stay on a notification issued by the Director General of Foreign Trade (DGFT) that attempted to unilaterally change the Customs classification of Roasted Areca Nuts. The petitioners challenged Notification No. 02/2025-26 dated April 2, 2025, arguing that the DGFT lacked the statutory power to amend the classification of goods under the Customs Tariff.
The Classification Dispute
The contested DGFT notification sought to shift the classification of Roasted Areca Nuts from Chapter Heading 20081920 to Chapter Heading 08028090. The petitioners contended that while the DGFT is empowered to restrict or prohibit imports under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), the power to change the classification of goods from one Chapter Heading to another rests exclusively with the Central Government under Section 11A of the Customs Tariff Act, 1975.
The High Court undertook a prima facie examination of the statutory provisions, comparing the powers of the DGFT under the Foreign Trade Policy (FTP) with the powers granted to the Central Government under the Customs Tariff Act.
Analysis of Statutory Powers
1. DGFT Powers (FTDR Act and FTP): The court noted that the DGFT issued the notification by invoking powers under Section 3 and Section 5 of the FTDR Act, read with paragraphs 1.02 and 2.01 of the Foreign Trade Policy. These provisions generally allow the Central Government to amend the FTP in the public interest and permit the DGFT to impose prohibition or restriction on the import or export of goods. The High Court, however, found that none of these provisions, at least on a preliminary reading, granted the DGFT the authority to change a product’s fundamental classification between Chapters of the Customs Tariff.
2. Central Government Power (Customs Tariff Act): In contrast, the court highlighted Section 11A of the Customs Tariff Act, 1975, which explicitly empowers the Central Government to amend the First Schedule (which contains the classifications) of the Act by notification in the Official Gazette, provided it is done in the public interest. This power is subject to the proviso that the amendment must not alter the rates of duty and must be laid before both Houses of Parliament.
The court concluded that the power to change the classification of goods from one Chapter to another is exclusively vested in the Central Government under Section 11A of the Customs Tariff Act, and the DGFT appears to have exceeded its jurisdiction by issuing the classification change notification.
