ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 31.12.2025
High Court of Gujarat Upholds Customs Duty Exemption for Inshell Walnuts Under DFIA Scheme
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.โ โ โ
On December 24, 2025, the High Court of Gujarat delivered a significant judgment in the case of The Commissioner of Customs – Kandla vs. M/s Devam Impex (R/Tax Appeal No. โ 507 of 2025). โ The case revolved around the applicability of Customs Notification No. โ 25/2023-Cus dated April 1, 2023, which provides exemptions from Basic Customs Duty on imports under Transferable Duty-Free Import Authorizations (DFIAs). โ The court upheld the ruling of the Customs Authority for Advance Rulings (CAAR), allowing M/s Devam Impex to import “Inshell Walnuts” under the DFIA scheme.
Background of the Case
M/s Devam Impex, a proprietorship firm holding a valid Importer-Exporter Code (IEC), applied for an Advance Ruling under Section 28H of the Customs Act, 1962. โ The firm sought clarity on whether “Inshell Walnuts” could be imported under the DFIA scheme by availing the exemption provided in Notification No. โ 25/2023-Cus. The DFIA was issued in line with Paragraph Nos. 4.24 and 4.26 of the Foreign Trade Policy (FTP) and was based on Standard Input Output Norms (SION) E-1 for Assorted Confectionary Products and SION E-5 for Biscuits. โ
The CAAR ruled in favor of M/s Devam Impex, stating that “Inshell Walnuts” are permissible for import under the DFIA scheme as they fall under the description of “Other Confectionery Ingredients” and “Dietary Fibre” in the DFIA license. โ The ruling was challenged by the Commissioner of Customs – Kandla, leading to the present appeal before the High Court of Gujarat.
Key Issues Raised in the Appeal โ
The appellant, represented by Senior Standing Counsel, argued that the CAAR’s ruling was erroneous for the following reasons:
- Misclassification of Walnuts: The appellant contended that “Inshell Walnuts” could not be classified as “Dietary Fibre” under SION E-5, as dietary fibre typically refers to cellulose or pectin-based roughage used in biscuit formulation, not high-fat nuts composed of oils and proteins. โ
- Absence of Specific Endorsement: The appellant argued that the exemption was granted despite the absence of specific endorsement of the Harmonized System (HS) Code for “Inshell Walnuts” in the DFIA license. โ
- Technical Usage: The appellant claimed that the actual technical usage of “Inshell Walnuts” in the exported products was not established, which is a requirement under Paragraph No. โ 4.12 of the FTP and the conditions of the Notification. โ
- Circulars and Public Notices: The appellant referred to DGFT’s Public Notice No. โ 20/2025-26, which suspended SION norms in the food sector, including SION E-1 and SION E-5, arguing that the legal basis for the CAAR ruling was no longer valid. โ
Respondent’s Defense
The respondent, represented by Senior Advocate, countered the appellant’s arguments with the following points:
- Legal Precedent: The respondent relied on the Bombay High Court’s judgment in The Commissioner of Customs, Nhava Sheva-V vs. VKC Nuts Private Limited (2022), which affirmed that walnuts, including inshell walnuts, fall within the broader classification of “Dietary Fibre” for DFIA entries. โ
- Circular Clarifications: The respondent referred to CBIC Circular No. โ 20/2025-Cus dated July 24, 2025, which clarified that correlation between technical characteristics, quality, or specifications of inputs used in export products and those imported under DFIA is not required, except for inputs specified under Paragraph No. โ 4.29 of the FTP. “Inshell Walnuts” are not listed under Paragraph No. 4.29, making the correlation unnecessary.
- Technical Opinion: The respondent highlighted the technical opinion of the Joint Director, Jawahar Customs House Laboratory, which confirmed that walnuts could be used as a source of dietary fibre in the manufacture of biscuits and confectionery. โ
- DFIA License Validity: The respondent argued that the DFIA license issued to them permits the import of goods described as “Other Confectionery Ingredients” and “Dietary Fibre,” and the absence of a specific HS Code does not invalidate the import. โ
High Court’s Analysis and Judgment
The High Court of Gujarat thoroughly analyzed the arguments presented by both parties and referred to various legal precedents, including the Bombay High Court’s judgment in VKC Nuts Private Limited and decisions by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT). โ The court noted the following:
- Legal Precedent: The Bombay High Court had already ruled that “Inshell Walnuts” are covered under the description of “Dietary Fibre” and can be imported duty-free under the DFIA scheme. โ The technical opinion supporting this classification was not refuted by the appellant. โ
- Clarificatory Circular: The CBIC Circular No. โ 20/2025-Cus clarified that correlation of technical characteristics, quality, and specifications is not required for inputs not listed under Paragraph No. โ 4.29 of the FTP. This further supported the respondent’s case. โ
- Restricted Scope of Appeal: The court emphasized that the scope of appeal under Section 28KA of the Customs Act, 1962, is limited to cases where the ruling of the authority is profoundly illegal, arbitrary, or unreasonable. โ The court found no such issues in the CAAR’s ruling. โ
- Dismissal of Appeal: The court concluded that the proposed questions of law had already been answered by existing legal precedents and dismissed the appeal. โ The civil application was also disposed of. โ
Conclusion
The High Court’s judgment in favor of M/s Devam Impex reinforces the importance of legal precedents and clarificatory circulars in resolving disputes related to customs duty exemptions. The case highlights the complexities of interpreting exemption notifications and the significance of technical opinions in determining the classification of imported goods. โ By upholding the CAAR’s ruling, the court has provided clarity and certainty to importers and exporters operating under the DFIA scheme, ensuring compliance with the Foreign Trade Policy while facilitating trade.
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Source: Gujarat High Court
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