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Date: 14.02.2026
Karnataka High Court Ruled in Favor of Vidya Herbs in Customs Dispute Over Import Declaration
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idย intelconsul@gmail.com or on his Mobile +91-9999005379.
On January 16, 2024, the High Court of Karnataka at Bengaluru delivered a significant judgment in the case of CSTA No. โ 6 of 2023, involving the Commissioner of Customs, Mangalore, and Vidya Herbs Private Limited. The case revolved around the import of goods by Vidya Herbs, a 100% Export Oriented Unit (EOU), and the subsequent dispute regarding the classification and declaration of the imported goods. โ
Background of the Case
Vidya Herbs Private Limited, a 100% EOU, filed a Bill of Entry on November 16, 2022, to clear goods declared as “Vietnam Robusta Coffee Beans” with a declared value of โน96,09,828. โ The company sought to avail the benefit of Notification No. โ 52/2003-Customs dated July 22, 2003, which provides certain exemptions for EOUs. โ The Bill of Entry was cleared through the Risk Management System (RMS) without assessment. โ
However, during an open examination, Customs Officers observed that the imported goods were coffee husks instead of coffee beans, as declared. โ The goods were subjected to further examination, and Vidya Herbs sought clearance under the Import of Goods at Concessional Rate of Duty Rules (IGCR), 2017, claiming the goods were classifiable under HS Code 09011145 and intended for use in manufacturing herbal extracts. โ
Vidya Herbs acknowledged the mismatch in the declaration and expressed willingness to pay the applicable duty to amend the Bill of Entry and clear the goods. โ Despite this, the Commissioner of Customs passed an Order-in-Original on February 1, 2023, determining the assessable value at โน96,09,828, confiscating the goods under Sections 111(f), (l), (m), and (o) of the Customs Act, 1962, and ordering their release upon payment of a redemption fine of โน10 lakhs. โ
Appeal to CESTAT and Subsequent High Court Proceedings โ
Vidya Herbs challenged the Order-in-Original before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), South Regional Bench, Bengaluru. The CESTAT ruled in favor of Vidya Herbs, stating that the import policy requires a liberal approach to promote the activities of EOUs. โ The tribunal emphasized that the Customs Authority’s role is to verify the compliance of imported goods with import documents and approvals. โ It also noted that the goods were not seized, and the transaction was revenue-neutral since the goods were intended for re-export. โ
The Commissioner of Customs subsequently filed an appeal in the High Court of Karnataka, arguing that the CESTAT erred in allowing the appeal as the investigation was incomplete. The Revenue also pointed out that Vidya Herbs had admitted to the mismatch in the import documents and expressed willingness to pay the applicable duty. โ
High Court Judgment โ
After hearing arguments from both sides, the High Court dismissed the appeal filed by the Commissioner of Customs. The court noted the following key points:
- No Seizure of Goods: The court agreed with Vidya Herbs’ argument that confiscation could not be ordered unless the goods were seized. โ Since the goods were not seized, the confiscation order was deemed unsustainable. โ
- Revenue Neutrality: The court acknowledged that Vidya Herbs is a 100% EOU, and the imported goods were intended for processing and re-export. โ Unless the Customs Authority could prove that the goods were sold in the domestic market or not re-exported, the issue remained revenue-neutral. โ
- Liberal Approach for EOUs: The court upheld the CESTAT’s view that a liberal approach should be taken under the import policy to promote the activities of EOUs. โ It also noted that the CESTAT had reserved the liberty for Vidya Herbs to submit a fresh application under Rule 5(1)(a) of the IGCR Rules, 2017. โ
Final Order
The High Court concluded that the Revenue had no valid grievance against the CESTAT’s order. โ The appeal was dismissed, and the substantial questions of law raised by the Revenue were answered in favor of Vidya Herbs Private Limited. โ The court also ruled that no costs would be imposed. โ
Key Takeaways
This judgment highlights the importance of adhering to the principles of revenue neutrality and the need for a liberal approach in cases involving Export Oriented Units. โ It also underscores the significance of proper procedures, such as the requirement for seizure before confiscation, in customs-related disputes.
The case serves as a reminder for importers to ensure accurate declarations in their import documents to avoid legal complications. At the same time, it emphasizes the role of Customs Authorities in verifying compliance without unnecessarily penalizing EOUs that contribute to export activities. โ
Conclusion
The High Court’s decision in favor of Vidya Herbs Private Limited is a landmark ruling that reinforces the principles of fairness and transparency in customs proceedings. It sets a precedent for similar cases involving EOUs and highlights the importance of balancing regulatory compliance with the promotion of export-oriented businesses. โ
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Source: Karnataka High Court
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