Karnataka High Court
Union Of India vs M/S Tmk Traders on 9 April, 2026
Author: S.G.Pandit
Bench: S.G.Pandit
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WA No. 1925 of 2025
Reserved on : 02.04.2026
Pronounced on : 09.04.2026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF APRIL, 2026
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE MR. JUSTICE K. V. ARAVIND
WRIT APPEAL No. 1925 OF 2025 (T-CUS)
BETWEEN:
1. UNION OF INDIA,
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF INDIRECT TAX
AND CUSTOMS, NORTH BLOCK,
NEW DELHI-110001,
REPRESENTED BY ITS SECRETARY.
Digitally signed 2. THE JOINT COMMISSIONER OF CUSTOMS
by VINUTHA B OFFICE OF THE ADDITIONAL
S
Location: High
COMMISSIONER OF CUSTOMS,
Court of BENGALURU CITY CUSTOMS
Karnataka COMMISSIONERATE,
INLAND CUSTOMS DEPOT,
WHITEFIELD, BENGALURU 560066.
3. THE DEPUTY COMMISSIONER OF CUSTOMS,
OFFICE OF THE ADDITIONAL
COMMISSIONER OF CUSTOMS,
BENGALURU CITY CUSTOMS
COMMISSIONERATE,
INLAND COSTOMS DEPOT,
WHITEFIELD, BENGALURU -560066.
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WA No. 1925 of 2025
4. THE ASSISTANT COMMISSIONER OF CUSTOMS
SIIB, OFFICE OF THE ADDITIONAL
COMMISSIONER OF CUSTOMS,
BENGALURU CITY CUSTOMS
COMMISSIONERATE,
INLAND CUSTOMS DEPOT,
WHITEFIELD, BENGALURU-560066.
5. CENTRAL REVENUES CONTROL LABORATORY,
HILLSIDE ROAD, PUSA,
NEW DELHI - 110012,
REPRESENTED BY ITS DIRECTOR.
6. FOOD SAFETY AND STANDARDS
AUTHORITY OF INDIA,
FSSAI, 4TH FLOOR, MANUVANA,
NEAR HOSAHALLI METRO STATION,
VIJAY NAGAR, BANGALORE-560040.
REPRESENTED BY ITS ASSISTANT DIRECTOR.
7. CENTRAL PLANTATION CROPS
RESEARCH INSTITUTE,
KASARGOD, KERALA - 671124,
REPRESENTED BY ITS DIRECTOR.
...APPELLANTS
(BY SRI K. ARAVIND KAMATH, ASG A/W
SRI M.UNNIKRISHNAN, SENIOR STANDING COUNSEL)
AND:
1. M/S TMK TRADERS,
REPRESENTED BY ITS PROPRIETOR,
SHRI DURAISAMY THIRUMALAI,
AGED 54 YEARS,
S/O THIRUMALAI,
HAVING A OFFICE AT:
65, W-29, RANGER OFFICE ROAD,
KAMBAM, THENI, TAMIL NADU -625516.
...RESPONDENT
(BY SRI M.S. SAJEEV KUMAR, ADVOCATE FOR SRI ASWIN PRABHU S. D., ADVOCATE FOR C/R1) -3- WA No. 1925 of 2025 THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SETTING ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No.24835/2025 DATED 29/10/2025 AND CONSEQUENTLY DISMISS THE SAID PETITION.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY, K.V. ARAVIND J., DELIVERED THE FOLLOWING:-
CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
and
HON'BLE MR. JUSTICE K. V. ARAVIND
C.A.V. JUDGMENT
(PER: HON'BLE MR. JUSTICE K. V. ARAVIND)
Heard Sri. K. Aravind Kamath, learned Additional Solicitor General along with Sri. M. Unnikrishnan, learned Senior Standing counsel for appellants and Sri. M.S. Sanjeev Kumar, learned counsel for Sri. Aswin Prabhu S.D., learned counsel for caveator/respondent No.1.
2. This intra-Court appeal is filed by the Revenue, impugning the order dated 29.10.2025 passed by the learned Single Judge in W.P. No.24835/2025.
3. The brief facts, in nutshell, are that the respondent imported 54 metric tons of betel nuts from Indonesia and filed -4- WA No. 1925 of 2025 Bill of Entry No.8953207 dated 18.03.2025. The respondent claimed that the imported goods were roasted arecanuts. The appellants subjected the goods to sampling and testing by the Indian Council of Agricultural Research (for short, 'ICAR'). ICAR, in its test report, opined that the imported goods were not roasted arecanuts.
3.1 Aggrieved thereby, the respondent filed a writ petition seeking a writ of mandamus to release the goods covered under the Bill of Entry or, in the alternative, to direct drawing of fresh samples from the consignment and to conduct re- testing of such samples through any agency accredited by the Food Safety and Standards Authority of India (for short, 'FSSAI').
3.2 The learned Single Judge, under the impugned order, directed the appellants to release the imported consignment, subject to the respondent furnishing a bank guarantee to the extent of 25% of the value of the goods, as indicated in the Bill of Entry and the Commercial Invoice dated 17.02.2024.
4. Sri K. Aravind Kamath, learned Additional Solicitor General appearing for the appellants-Revenue, submits that the Bill of Entry describes the imported goods as roasted betel -5- WA No. 1925 of 2025 nuts. However, according to the appellants, the goods are, in fact, raw betel nuts falling under a different tariff classification. Samples of the goods were sent for testing to the ICAR-Central Plantation Crops Research Institute, Kasaragod. ICAR, in its report dated 16.06.2025, upon examining the samples and their moisture content, has concluded that the samples are raw dried arecanuts and not roasted arecanuts. It is further submitted that, as per the said report, the samples have not undergone the process of roasting, but have only undergone partial drying.
4.1 It is contended that, in view of the ICAR report, the goods are liable to be provisionally assessed as raw arecanuts under Tariff Heading 080280. It is further submitted that, in terms of Section 14(1) of the Customs Act, 1962 (for short, 'the Act'), the transaction value of the goods is ordinarily to be adopted. However, sub-section (2) of Section 14 empowers the Board to fix tariff values for any class of imported goods, notwithstanding anything contained in sub-section (1). 4.2 In exercise of the powers conferred under Section 14(2) of the Act, the Board has issued Notification No. 13/2025 dated 13.03.2025, effective from 14.03.2025, prescribing the tariff -6- WA No. 1925 of 2025 value of arecanuts falling under Tariff Heading 080280 at USD 8140. It is submitted that, if the imported goods are assessed as raw arecanuts by applying the notified tariff value, the value of the goods would be Rs.3,85,93,368/-.
4.3 It is further submitted that, if the goods are to be released, such release ought to be subject to deposit of 100% of the duty on the value so determined, pending final adjudication. In this regard, it is contended that, in view of the tariff value notified under Section 14(2) of the Act, the direction of the learned Single Judge to release the goods subject to furnishing a bank guarantee to the extent of 25% of the invoice value is erroneous.
4.4 Learned Additional Solicitor General further submits that the genuineness of the respondent's business cannot be ascertained merely by inspection of the business premises. It is contended that, though a registration certificate has been issued, the business premises do not appear to be genuine. It is further submitted that the respondent does not possess sufficient fixed assets or creditworthiness to secure recovery of dues, subject to the outcome of the adjudication proceedings. -7- WA No. 1925 of 2025 4.5 It is submitted that, on account of the pendency of the writ petition and the present appeal, a show cause notice has not yet been issued for final determination of liability. It is further contended that the goods may be released only upon deposit of 100% of the duty, determined by treating the imported goods as raw arecanuts and by applying the tariff value notified under Section 14(2) of the Act in Notification No.13/2025-Customs (N.T.) dated 13.03.2025. 4.6 Learned Additional Solicitor General further submits that, in terms of Notification No.02/2025-26 dated 02.04.2025 issued by the Ministry of Commerce and Industry, Department of Commerce, Director General of Foreign Trade, roasted arecanuts are not covered under Tariff Item 08028090.
5. Per contra, Sri M. S. Sajeev Kumar, learned counsel appearing for Sri Aswin Prabhu S.D., learned counsel for the respondent submits that that the invoice clearly describes the imported goods as whole roasted betel nuts and that the import has been effected pursuant to an Advance Authorisation. It is further contended that, in terms of Section 110(2) of the Act, if no notice of adjudication is issued within a period of six months -8- WA No. 1925 of 2025 from the date of seizure, the goods are liable to be returned to the person from whose possession they were seized. In the present case, it is submitted that the said period of six months has long since expired.
5.1 Learned counsel further submits that the report of the ICAR-Central Plantation Crops Research Institute, Kasaragod, relied upon by the Revenue to contend that the imported goods are not roasted arecanuts, cannot be relied upon, as ICAR is not the competent authority to determine classification of goods for customs purposes.
5.2 It is also contended that the tariff value notified under Section 14(2) of the Act applies only to arecanuts and not to roasted arecanuts, and that there is no notification under Section 14(2) fixing tariff value insofar as roasted arecanuts are concerned. It is submitted that Notification dated 02.04.2025 issued by the Director General of Foreign Trade has no application to the present case, as the same operates prospectively.
5.3 Learned counsel further submits that the respondent possesses sufficient valuable assets to safeguard the interests of the Revenue, subject to the outcome of the adjudication -9- WA No. 1925 of 2025 proceedings. It is also contended that the Revenue has unnecessarily delayed both the release of the seized goods and the initiation of adjudication proceedings. 5.4 It is submitted that, having regard to the nature of the goods, the same are liable to be released. It is further contended that, in the absence of any notification under Section 14(2) of the Act fixing the tariff value for roasted arecanuts, Section 14(1) would apply, and therefore, the learned Single Judge was justified in directing release of the goods upon furnishing a bank guarantee to the extent of 25% of the invoice value.
5.5 Without prejudice to the aforesaid submissions, learned counsel for the respondent-petitioner submits that the respondent is willing to deposit a sum of ₹20,00,000/- for immediate release of the goods, without prejudice to the contentions to be urged in the adjudication proceedings.
6. We have bestowed our consideration to the submissions made and the appeal papers.
7. The central dispute in the present case pertains to the classification of the imported goods, namely, whether they are
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WA No. 1925 of 2025dried arecanuts or roasted arecanuts. The respondent- petitioner places reliance on the invoice issued by the exporter from Indonesia, which describes the goods as whole roasted betel nuts, and on that basis the Bill of Entry has been filed. The Revenue, disputing such classification, subjected samples of the imported goods to expert examination by the ICAR- Central Plantation Crops Research Institute, Kasaragod. ICAR, in its report dated 16.06.2025, has opined that the samples have not undergone the process of roasting, though they have undergone partial drying.
7.1 Whether the imported goods are roasted arecanuts or dried arecanuts is a matter that requires adjudication by the competent authority under the provisions of the Act. Any observation on the merits of such classification at this stage would prejudice the interests of either party. The appellants have, however, relied upon the expert opinion indicating that the imported goods are not roasted arecanuts. 7.2 Insofar as the issue relating to the quantum of security for release of the goods is concerned, Section 14(1) of the Act provides for adoption of the transaction value, whereas sub- section (2), which operates notwithstanding sub-section (1),
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WA No. 1925 of 2025empowers the Board to notify tariff values for any class of imported goods, in which event duty is chargeable with reference to such tariff value. In exercise of powers under Section 14(2), the Board has issued Notification No. 13/2025- Customs (N.T.) dated 13.03.2025, fixing the tariff value of arecanuts under Tariff Heading 080280 at USD 8140 per metric ton.
7.3 In order to examine the contention and apprehension of the Revenue regarding the genuineness and financial credibility of the respondent, this Court, during the course of hearing, directed the respondent to place its financial statements on record. Pursuant thereto, the respondent has produced the bank statement for the period from 01.04.2025 to 23.03.2026 maintained with ICICI Bank, along with a memo dated 25.03.2026. The trading and profit and loss account for the year ending 31.03.2025, as well as the balance sheet as on 31.03.2025, are also placed on record.
7.4 A perusal of the bank statement, which contains 333 entries for the aforesaid period, does not inspire confidence as to the financial credibility of the respondent, as the balance has consistently remained only in a few thousands. The balance
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WA No. 1925 of 2025sheet reflects cash in hand of Rs.28,090/- and cash at bank of Rs.26,369/- as on 31.03.2025. The value of furniture and fittings, building, vehicle, machinery and office assets does not appear to be substantial enough to meet any potential liability. Though receivables are shown to the extent of Rs.3,06,53,679/-, we find it difficult to conclude that the interests of the Revenue are adequately safeguarded on the basis of the bank statement and the balance sheet. 7.5 Prima facie, the material on record, particularly the ICAR report, indicates that the imported goods appear not to be roasted arecanuts. Further, the valuation of the goods would be required to be undertaken with reference to the tariff value notified under Section 14(2) of the Act. It is also to be noted that the proceedings have remained pending with the authorities since March 2025 for more than one year. When queried regarding the stage of adjudication, it is submitted that the adjudication proceedings are yet to be initiated by issuance of a show cause notice, and that such notice has not been issued in view of the pendency of the writ petition and the present appeal.
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WA No. 1925 of 20257.6 We find no justification in the said submission. The writ petition was filed seeking a direction for release of the goods, and there was no interim order restraining the authorities from initiating adjudication proceedings. The authorities had the benefit of the ICAR report as early as 16.06.2025. Having regard to the nature of the goods, which are perishable, prompt action was warranted.
7.7 On the one hand, the Revenue pleads the need to protect its interests; on the other hand, it has failed to discharge its obligation of initiating adjudication proceedings. Such inaction is not appreciable. The lack of diligence on the part of the authorities ought not to cause prejudice or place the taxpayer in a disadvantageous position. Non-adjudication for a period exceeding one year is wholly unjustifiable. 7.8 At the same time, the inaction of the authorities cannot be permitted to operate to the benefit of the respondent without adequately safeguarding public revenue. The classification of the imported goods remains pending adjudication and is required to be determined by the competent authority in accordance with law.
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WA No. 1925 of 2025
8. Having regard to the facts and circumstances of the present case, and in order to protect the interests of both parties, we deem it appropriate to pass the following order and directions:
(i) The appellants shall issue show cause
notice within 2 weeks from today.
(ii) The respondent is granted 3 weeks time
to file reply to the show cause notice
from its date.
(iii) The competent authority shall adjudicate the show cause notice within a period of three weeks from the date of filing of reply by the respondent. The question of release of the goods in question shall be considered subject to the outcome of such adjudication.
(iv) In the alternative, if the respondent deposits
50% of the determined amount, i.e.,
₹3,85,93,368/-, and furnishes a bank
guarantee for 25% of the said amount, the
goods shall be released pending adjudication of the proceedings proposed to be initiated.
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WA No. 1925 of 2025
9. With the above observations and to the extent indicated hereinabove, the order of the learned Single Judge dated 29.10.2025 passed in W.P. No. 24835/2025 stands modified. Accordingly, the writ appeal is disposed of.
Sd/-
(S.G.PANDIT) JUDGE Sd/-
(K. V. ARAVIND) JUDGE VBS