Can Customs Deny Advance Authorisation Benefit for Misclassified Imports? Supreme Court Stays Kerala HC Relief to Nitta Gelatin [Read Judgement]

The dispute traces to imports of decalcified fish scales that were imported by Nitta Gelatin under Advance Authorisations issued by the Directorate General of Foreign Trade (DGFT) to procure inputs for export manufacture.

Also Read: Supreme Court toDecide Customs Appeal for Dispute of Classification of Fish Oil Ethyl Esters

The Commissioner of Customs, after testing and investigation, concluded the imported material to be classifiable under Customs Tariff Heading 0511 9190 as ‘decalcified fish scale’ rather than as fish protein under Chapter 35 as had been claimed by the exporter. Consequently, show-cause notices were issued, along with demands raised for differential duty. The goods were also directed to be confiscated on account of the suppression of the correct description of the goods and for misdeclaring the same, however they were allowed to be redeemed on payment of redemption fine.

In appeal, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) found that the differential duty demanded in respect of those Bills of Entry could be sustained although the question of redemption fine and penalty did not arise since the assessments themselves were only provisional in nature.

Aggrieved by the setting aside of the differential duty demand, redemption fine and penalty in respect of the past consignments imported by the assessee, the Revenue appealed before the Kerala High Court.

Also Read: Customs CannotDeny Benefit on 'Decalcified Fish Scale' Imported Under Advance AuthorisationScheme: Kerala HC

Whereas the assessee was in appeal aggrieved by the confirmation of the differential duty demand in respect of the live transactions

Before the High Court, the assessee was represented by V. Sridharan, Dhananjay Sethuraj, Karthik S. Nair and R. Raghavan, while the Revenue was represented by R. Harishankar, Standing Counsel.

The Kerala High Court bench of Justice A.K. Jayasankaran Nambiar and Justice P.M. Manoj examined whether differing descriptions used at import time vitiated entitlement to Notification No.96/2009 granting nil duty for imports under Advance Authorisation.

The High Court accepted the Tribunal’s approach that, although the goods were correctly classifiable as decalcified fish scale, past imports effected under Advance Authorisation and described as “fish protein” could not be treated as breaches when the licensing authority had not cancelled or questioned the authorisations.

Relying on the Supreme Court decision in Titan Medical Systems Pvt. Ltd. v. Collector of Customs, New Delhi (2003), the High Court held that in the absence of any objection from the licensing authority or cancellation of the authorisation, Customs could not deny the notification benefit.

The High Court accordingly set aside differential duty demands, redemption fine and penalty in respect of 42 past consignments, while upholding demands limited to nine live, provisionally assessed entries vide an order dated 26 June, 2025.

The decision was appealed by the Customs before the Supreme Court through the present Special Leave Petition.

Also Read: When Can YouAppeal Directly to Supreme Court in Tax, Customs, and GST Matters? A DetailedExplanation

Following submissions by Additional Solicitor General of India, N.Venkataraman for the Customs and V Sridharan, senior counsel appearing for the Nitta Gelatin, the Supreme Court Bench of Justice J.B.Pardiwala and Justice K.V. Viswanathan ordered the issuance of notice, and ordered a stay on the operation of the Kerala High Court order in the meantime.

The legal question whether discrepancies in import goods classification alone can strip an importer of Advance Authorisation concessions is yet to reach finality, with the Supreme Court ordering that the notice returnable on 17 November, 2025.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates