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Dated: 14.04.2025

Punjab & Haryana High Court Upholds CESTAT Order Permitting Re-export of Seized Areca Nuts

The Punjab & Haryana High Court in CUSAP Nos. 4 & 5 of 2024 upheld the order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chandigarh, permitting re-export of seized consignments of Areca Nuts imported by M/s Star Spices and M/s Sherry Network Pvt. Ltd.

Background:

• The importers had claimed exemption of Basic Customs Duty (BCD) under the India-Sri Lanka Free Trade Agreement (ISFTA).
• DRI investigation alleged that Indonesian origin areca nuts were misdeclared as Sri Lankan origin to claim duty exemption.
• The goods were also found unfit for human consumption per FSSAI standards.
• Customs passed an order of absolute confiscation and imposed penalties, upheld by the Commissioner (Appeals).

CESTAT’s Key Findings (Order dated 07.06.2024):

• Found that although the goods were not fit for human consumption, re-export could be permitted for non-edible industrial use.
• Noted other industrial applications of areca nuts (e.g. dyes, adhesives, insulation, activated carbon).
• Held that re-export with appropriate declaration and safeguards (including endorsement that goods are unfit for human consumption) would serve justice.
• Reduced the penalty to ₹10 lakhs and imposed a redemption fine of ₹25 lakhs in lieu of confiscation.

High Court Decision (Order dated 14.11.2024):

• Affirmed that presumption of intent to evade duty was not justified, especially when Sri Lankan origin documents were present.
• Reiterated that reports relied on by the department (e.g. Areca Nut Research Foundation, Mangalore) had previously been deemed unreliable by the Supreme Court.
• Held that customs could not base 2023 seizure on 2018 chats and digital evidence without contemporaneous relevance.
• Acknowledged that importers were regular traders, with history of cleared consignments under valid documents.
• Supported the Tribunal’s balanced approach allowing re-export subject to safeguards.

Final Order:

• Upheld the CESTAT’s decision:
  • Set aside absolute confiscation.
  • Allowed re-export on payment of ₹25 lakh fine.
  • Penalty reduced to ₹10 lakh.
  • Required endorsement in re-export documents that the goods were found unfit for human consumption as per Indian standards.
• Importers directed to undertake non-re-routing of goods back to India.

Significance:

• Clarifies judicial view on permitting re-export of unfit goods in lieu of destruction/confiscation.
• Balances trade facilitation with public health standards.
• Highlights the need for contemporaneous and credible evidence in customs evasion cases.

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Source: Punjab & Haryana High Court

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