Madras High Court Quashes ₹12.58 Cr Demand Against Pellagic Food, Upholds Advance Ruling Principles

The Madras High Court on 9 July quashed the Customs order passed against Pellagic Food Ingredients Pvt. Ltd. that raised a demand of Rs. 12.58 crore as differential customs duty, along with interest, confiscation of goods, redemption fine and penalties.

A Single Judge Bench of Justice Hemant Chandangoudar held that Customs authorities should ordinarily follow the legal principles laid down in an Advance Ruling in similar cases, even though such rulings bind only the applicant who obtained them, unless facts or law change. He observed:

“although an Advance Ruling under the Customs Act is binding only upon the applicant and the jurisdictional customs authorities, the legal principles embodied therein possess persuasive value and ought to be followed in subsequent cases unless there are distinguishing facts or a change in the governing law”.

Pellagic Food Ingredients' imported dehydrated dark and small seedless raisins (Vitis Vinifera). It classified the goods under Customs Tariff Heading (CTH) 08062010 and claimed exemption under Notification No. 50/2017-Cus. The Food Safety and Standards Authority of India (FSSAI) and the Directorate of Plant Protection, Quarantine and Storage certified the goods as raisins. Following these certifications, Customs cleared the consignments.

Later, the Customs Department issued a show cause notice alleging that the imported goods were currants and not raisins. Relying on an investigation by the Directorate of Revenue Intelligence (DRI), the department reclassified the goods under a different tariff heading and raised a differential duty demand exceeding Rs. 12.58 crore.

Before the adjudicating authority, Pellagic Food Ingredients relied on the statutory certificates issued by FSSAI and the Plant Quarantine Authority. It also relied on an Advance Ruling which held that dehydrated dark and small seedless raisins were classifiable under CTH 08062010, subject to certification by competent authorities. The adjudicating authority refused to apply the Advance Ruling, holding that it bound only the importer who obtained it.

The High Court rejected this view and relied on the Supreme Court's decision in Columbia Sportswear Co. v. Director of Income Tax. It held that while an Advance Ruling under the Customs Act binds only the applicant and the jurisdictional Customs authorities, the legal principles laid down in such rulings have persuasive value and should ordinarily guide similar cases.

Further, it held that Customs authorities cannot disregard an Advance Ruling merely because it was issued in another importer's case unless they identify distinguishing facts or a change in the governing law. The Bench also noted that the Customs Department failed to produce the DRI investigation report relied upon in the adjudication order. It also found that the department did not conduct any laboratory examination to establish that the imported goods were currants and not raisins.

It held that Pellagic Food Ingredients produced reliable statutory certificates supporting its classification, while the department failed to substantiate its contrary conclusion with evidence. It added:

“The adjudicating authority failed to consider these materials in their proper perspective and passed the impugned order solely on the basis of an unsubstantiated DRI investigation.”

Accordingly, the High Court quashed the order confirming the differential customs duty demand, interest, confiscation, redemption fine and penalties, and allowed the writ petition without any order as to costs.

For Petitioner: Hari Radhakrishnan, Advocate

For Respondent: Sai Srujan Tayi, SPC