DGFT Export Restrictions on Garnet Not Limited To Beach Sand Minerals, Apply Regardless of Source: CESTAT [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that export restrictions imposed by the DGFT on garnet are not limited to beach sand minerals and apply irrespective of the source of the garnet.

Payal Synthetics Private Limited, the appellant, filed shipping bills for export of goods described as “Natural Abrasive” and classified them under Customs Tariff Heading 2513 2090. The exports were made in January 2019. At the relevant time, DGFT Notification No. 26/2015–20 had amended the export policy and canalised the export of garnet under CTH 2513 2030 through Indian Rare Earths Limited.

On the appellant’s request, Customs allowed provisional export of the consignments and drew samples for testing. The test reports later identified the goods as Natural Almandine Pyrope Garnet. Based on the test results, the department issued a show cause notice alleging misdeclaration, proposing reclassification under CTH 2513 2030, confiscation of the goods, and imposition of redemption fine and penalties.

The adjudicating authority confirmed the classification as garnet, ordered confiscation, imposed a redemption fine, and levied penalties. The Commissioner (Appeals) upheld the order, following which the appellant approached the Tribunal.

The appellant’s counsel argued that the exported goods were natural abrasives manufactured from rocks procured from inland areas in Rajasthan and not from beach sand minerals. It was argued that the DGFT notification applied only to garnet derived from beach sand minerals and not to inland-origin garnet. The appellant’s counsel also argued that the test report only identified the goods as garnet and did not establish that they were sourced from beach sand minerals.

The revenue counsel argued that the DGFT notification canalised export of garnet under the relevant tariff heading without making any distinction based on the place of origin. They argued that garnet, irrespective of whether it is sourced from inland or coastal areas, is covered under the same tariff heading and is subject to the same export restrictions. They also argued that misclassification as “Natural Abrasive” was intended to bypass the canalisation requirement.

The two-member bench comprising Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) observed that the DGFT notification does not restrict its application only to beach-origin garnet. The tribunal explained that the purpose of the notification was to regulate export of garnet due to concerns relating to rare earth elements, and such concerns are not confined only to beach sand minerals.

The tribunal observed that the Customs Tariff does not differentiate between inland and beach-origin garnet and both fall under the same tariff heading.

The Tribunal further observed that the test report identifying the goods as garnet was not disputed by the appellant. The Tribunal pointed out that exporting the goods without routing them through the canalising agency amounted to violation of the export policy. The Tribunal explained that declaring the goods under an alternate tariff heading amounted to misdeclaration.

The Tribunal upheld the confiscation of the goods along with the redemption fine and penalties imposed. The appeal filed by Payal Synthetics Private Limited was dismissed.

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