Court rules seizure based on suspended notice and affirms exemption under DFIA Scheme.
In a significant ruling, the Madras High Court has quashed the seizure of Vital Wheat Gluten imported by M/s. Bhansali Chematics Private Limited under the Duty Free Import Authorisation (DFIA) Scheme. The Court held that the seizure memo issued by the Directorate of Revenue Intelligence (DRI) was arbitrary and unsustainable, as it was based on a public notice that had been suspended prior to the import of the goods.
The petitioner, represented by its director Shri Akhil Bhansali, imported Vital Wheat Gluten and claimed exemption from Basic Customs Duty under the DFIA Scheme. However, the Customs Department seized the goods, claiming they were not entitled to duty-free import as per a Public Notice issued in 2016, which was later suspended in August 2025.
Justice Hemant Chandangoudar, presiding over the case, noted that the Public Notice ceased to operate once suspended and could not be relied upon for confiscation. The judgment emphasized that the DFIA Scheme permits the import of wheat flour, and binding judicial precedents have consistently held that wheat gluten qualifies as wheat flour under the scheme.
The Court also criticized the Customs Department for ignoring binding decisions from the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and earlier orders from a Coordinate Bench of the Madras High Court, which affirmed the exemption for wheat gluten. The respondents failed to present any evidence that these decisions had been stayed or overturned.
Furthermore, the Court highlighted that the Circular issued by the respondent department clarified no need for technical correlation between the imported input and the exported product under the DFIA Scheme, thus supporting the petitioner's stance.
The judgment ordered the discharge of the bank guarantee furnished by the petitioner and directed the Customs Department to return the original bank guarantee and indemnity bond within two weeks.
This ruling reinforces the legal position that seized goods under Section 110 of the Customs Act must be based on legally sustainable material and cannot rely on suspended notices or disregard judicial precedents.
Bottom Line :
Customs Act, 1962 - Seizure of goods under Section 110 - Vital Wheat Gluten imported under Duty Free Import Authorisation (DFIA) Scheme - Seizure memo based on suspended Public Notice held to be arbitrary and unsustainable.
Statutory provision(s): Customs Act, 1962 Section 110
