Customs Cannot Detain Cattle Feed As Prohibited Goods Without Sufficient Grounds: Madras High Court

The Madras High Court on 28 September held that Customs authorities cannot treat imported cattle feed as prohibited goods merely on allegations of diversion for human consumption, particularly when laboratory reports indicate that the goods are unfit for human consumption.

A Division Bench comprising Justices Anita Sumanth and S. Raveekumar upheld the direction to release the consignment against sufficient indemnity in an appeal filed by Customs authorities against S.R. Rajarajendiran, proprietor of Asia Gate Exims, while allowing adjudication proceedings to continue in accordance with law. The judges said:

“...we have already found that one test report finds that the imported goods constitute cattle feed, unfit for human consumption, and two reports that certify that the goods did not conform to the required standards of human consumption. We thus reiterate that the argument that the goods are prohibited is, as at this stage at any event, baseless and of no merit whatsoever”

The case concerned Rajarajendiran's import of 500 bags of agricultural rejected nut pieces, residue and waste declared as cattle feed.

Customs authorities detained the consignment following an alert issued by the National Customs Targeting Centre, which flagged instances of consignments declared as cattle feed allegedly containing cashew kernels.

The Court considered three laboratory reports. One report found that the goods were unfit for human consumption, while another found that the sample did not meet prescribed standards because the acidity of the extracted fat exceeded the permissible limit. The third report found that the tested parameters fell within the specified limits for compounded cattle feed but stated that the sample's fitness for human consumption could not be determined because its exact identity was unknown.

Customs subsequently issued a seizure memo and extended its validity. Rajarajendiran challenged the seizure and sought release of the consignment. The Single Judge quashed the extension order and directed Customs to release the goods against indemnity, while allowing adjudication proceedings to continue.

Before the Division Bench, Customs argued that importers had allegedly diverted similar consignments declared as cattle feed for use in products intended for human consumption. It also contended that the declared import price of Rs. 90 per kg fell below the Rs. 680 per kg threshold mentioned in a customs alert concerning broken cashew kernels intended for human consumption.

The Court rejected these submissions as insufficient grounds to justify continued detention or seizure at that stage. It noted that Customs had failed to produce any notification supporting the claimed minimum price threshold, despite it specifically seeking it. The laboratory reports and a purchase order from a women's milk producers' cooperative society for cattle feed further supported the importer's claim regarding the intended use of the goods.

It also examined the legal question of calculating the period for extending seizure under Section 110(2) of the Customs Act, 1962. The provision requires Customs to issue a notice under Section 124(a) within six months of seizure, failing which it must return the goods, subject to the statutory extension mechanism.

On whether the six-month period should run from the date of detention or the date of seizure, the Court noted conflicting views in two earlier Division Bench judgments. In ALM Enterprises v. Commissioner of Customs (Imports), Chennai, it treated the date of seizure as relevant, while in K. Steamship Agencies Pvt. Ltd. v. Balaji Dekors, it treated detention as synonymous with seizure.

Since the later Bench had not considered the earlier judgment, the Court directed the Registry to place the matter before the Chief Justice to consider whether a larger Bench should resolve the conflict. It also held that a subsequent extension order issued during the pendency of the appeals had become infructuous.

Accordingly, the High Court upheld the direction to release the consignment against sufficient indemnity, dismissed the appeal challenging the subsequent extension order, and referred the question concerning the commencement of the six-month period to the Chief Justice for consideration of a larger Bench.

For Appellant: Advocate Sai Srujan Tayi

For Respondent: Advocate Hari Radhakrishnan