Perfect Trading Co Vs Commissioner of Customs & Ors (Delhi High Court)
In a recent order, the Delhi High Court directed the provisional release of a consignment of imported roasted areca nuts seized by Customs authorities, highlighting the inconsistencies in laboratory test reports and the apparent deterioration of the goods during the period of detention. The petitioner, Perfect Trading Co., had sought the release of the consignment which was held up since June 2024 following conflicting assessments of its quality and fitness for consumption.
The case, heard through hybrid mode, centered on a consignment of roasted areca nuts imported by Perfect Trading Co. The company had obtained an advance ruling (CAAR/Del/Perfect/01/2024/639 dated January 5, 2024) classifying roasted areca nuts under Customs Tariff Heading (CTH) 20081920, covering “Other roasted nuts & seeds.” This ruling, issued by the Advance Ruling Authority, had relied on previous decisions, including a Madras High Court judgment and a ruling by the Advance Ruling Authority Mumbai (CAAR/CUS/ APPL/95/2023 dated October 16, 2023) in the case of M/s. Shree Ganesh Traders, which similarly classified roasted areca nut under the same CTH. These precedents established the correct classification of the imported goods based on their nature as roasted nuts.
Despite the favorable advance ruling on classification, the consignment faced issues upon arrival. After the bill of entry was filed on June 21, 2024, Customs officials seized the goods. According to the petitioner, samples were sent to the Food Safety and Standards Authority of India (FSSAI). A Panchnama was drawn on July 3, 2024, and the goods were moved to a warehouse due to monsoon conditions. Subsequently, an FSSAI report was received.
The goods were then sent for testing to the Central Revenue Control Laboratory (CRCL). The petitioner contended that despite initially satisfactory reports, samples were repeatedly drawn and retested, leading to the continued non-release of the consignment. This prompted Perfect Trading Co. to file a writ petition under Article 226 of the Constitution of India seeking the setting aside of the seizure memo dated August 1, 2024, and unconditional release of the goods.
The court’s involvement began with an observation on December 12, 2024, noting the presence of conflicting reports regarding the quality of the areca nuts. Some reports indicated excessive moisture content and infestation by mould/insects, deeming the nuts unfit for human consumption, while reports presented by the petitioner claimed moisture content within prescribed limits. To resolve this discrepancy, the court directed FSSAI to conduct a fresh inspection and testing through a deputed food inspector. Customs officials and the petitioner’s representatives were permitted to be present during this assessment.
A subsequent order on January 16, 2025, addressed confusion regarding the applicable Food Safety and Standard Regulations. The National Food Laboratory (NFL), Ghaziabad, was specifically directed to test the samples according to sub-regulation 2.3.55 of the Food Safety and Standards (Food Products Standards and Food Additives) Regulation, 2011, which specifically governs areca nuts, betel nuts, or supari. This direction aimed to ensure the testing was conducted against the correct regulatory standards for the specific product.
During the proceedings, the petitioner altered their plea, requesting the provisional release of the goods not for human consumption, but for industrial use. This request was accompanied by purchase orders for industrial application of areca nuts. The Customs Department, however, opposed this prayer, citing concerns about the lack of a supervision mechanism to ensure the goods were strictly used for industrial purposes and not diverted for human consumption. They argued that the delay in clearing the consignment itself contributed to the situation and was a reason not to release the goods.
The court, after hearing both sides, took note of the various test reports presented throughout the case. It observed that the initial reports from either CRCL or FSSAI did not definitively state that the goods were unfit for human consumption. A report from October 1, 2024, from the primary laboratory, identified the sample as ‘Roasted Areca Nuts’. The CRCL’s report dated October 17, 2024, subsequently stated the sample was not fit for human consumption, and another report on October 25, 2024, indicated parameters did not match Roasted Areca Nut. These contrasted with earlier reports from June/July 2024 where CRCL had focused on moisture content and damaged nuts exceeding FSSAI limits.
The final report from the NFL, dated January 16, 2025, provided a conclusive assessment based on Regulation 2.3.55. This report found that the sample of Roasted Areca Nuts (Whole) did not meet the prescribed standards due to moisture, damaged nuts, and damage by mould & insects exceeding the maximum limits. It also noted the presence of fungus hyphae and a musty odour. The NFL concluded that the sample was “substandard” under section 3(1)(zx) and “unsafe” under section 3(1)(zz)(x)(xi) of the FSS Act, 2006.
Despite the NFL’s finding of the goods being substandard and unsafe under the FSS Act, the High Court highlighted the overall inconsistency in the reports since the initial import. The court opined that the deterioration of the roasted areca nuts likely occurred during the prolonged period the consignment remained in the custody of Customs or the warehouse due to the repeated testing process.
Considering the petitioner’s willingness to provide an undertaking that the goods would not be used for human consumption and would be strictly utilized for industrial purposes, the court determined that no useful purpose would be served by further detaining the consignment.
Consequently, the Delhi High Court ordered the provisional release of the consignment. This release is subject to the petitioner furnishing a security amount of Rs. 5 lakhs with the Customs Department. The court also directed the Customs Department to issue a show cause notice to the petitioner in accordance with the law and proceed to adjudicate the matter formally.
Crucially, Mr. Gagan Uppal, son of the proprietor of Perfect Trading Co., provided an undertaking to the court, assuring that the released goods would not be used for human consumption. The court sternly warned that any violation of this undertaking would be construed as contempt of court, and stringent action would be taken if Customs or any other department discovered the goods being used for human consumption. The petitioner was specifically directed to ensure the consignment is used solely for the industrial purposes as represented to the court.
The writ petition was disposed of with these directions, and all pending applications were also closed. The case underscores the challenges that can arise from differing laboratory assessments and the potential for goods to deteriorate during prolonged administrative and legal processes, ultimately leading to a pragmatic solution allowing for the alternative use of the imported consignment under strict conditions.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
