Customs Classifies Animal Feed as Edible Nuts: Madras HC Finds ₹1 Cr Bank Guarantee on ₹18L Import Onerous, Orders Reconsideration [Read Order]

The Madras High Court has set aside an order of the Customs Department which required an importer to furnish a ₹1 crore bank guarantee and 1.76 crore bond for the provisional release of animal feed cargo worth ₹18 lakh, terming the condition ‘Onerous’.

The cargo in question rejected agricultural nuts that were intended for use as animal feed, but the customs authorities had treated it as fit for human consumption, triggering higher import restrictions and duties.

The petitioner, Shri Murugula Shabbir Shaik had imported the goods through Chennai Port in November 2024. However, the Customs Department classified the cargo under Chapter 8 of the Customs Tariff Act, which pertains to edible nuts, and imposed conditions for provisional release under Section 110-A of the Customs Act, 1962.

These included a bank guarantee of ₹1 crore and a bond for ₹1.76 crore, despite the declared value of the goods being only ₹18.3 lakhs. The importer contended that the cargo was unfit for human consumption and should rightly fall under Chapter 23, which governs animal feed and carries far less regulatory and duty burdens.

The petitioner argued that the customs officers acted arbitrarily and with total non-application of mind. He contended that their reliance on Chapter 8 and a now-quashed CBIC Circular was unjustified.

In addition, the petition submitted a test report dated January 2025 that confirmed the goods were unfit for human use and asserted that there was no legal basis to impose minimum import price (MIP) restrictions or classify the goods as edible nuts. He also submitted that he was not granted a personal hearing before such extreme conditions were imposed a clear violation of principles of natural justice.

The Customs Department, on the other hand, argued that they had discretion under Section 110-A to impose such conditions and claimed that in earlier imports, similar goods from the petitioner had been diverted for human consumption.

Justice Abdul Quddhose observed that the conditions imposed for provisional release were disproportionate to the value of the goods and lacked a proper evidentiary foundation. The Court noted that when the cargo was clearly found unfit for human consumption, it was unclear how authorities could classify it under a chapter applicable to edible products.

The Judge also criticized the customs officers for relying on a circular that had already been quashed by the Delhi High Court. It observed that “The respondents under the impugned order have also relied upon the guidelines laid down in paragraphs 5.2 and 5.3 of the CBIC Circular No.35/2017–Customs for the purpose of imposing conditions for granting provisional release under Section 110-A of the Customs Act in favour of the petitioner. However, as seen from the Delhi High Court decision, which has been filed as a document along with this writ petition, the aforesaid Circular has been quashed by the Delhi High Court. When the Circular has been quashed, the said Circular cannot be relied upon by the respondents for imposing conditions for the grant of provisional release under Section 110- A of the Customs Act.”

The Court remitted the case to the Deputy Commissioner of Customs (Preventive) for additional review in considering the perishable nature of the commodities and the protracted delay in their clearance.

The respondent was directed to provide a personal hearing and allow the petitioner to submit a detailed explanation within three weeks. The Court made it clear that any future decision must be taken strictly in accordance with law, with due regard to the submissions made and the nature of the cargo involved.

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