Facts of the Case

This is a Customs Act matter, not a GST case — 'GST Bhavan' appears only because that is the building housing the Customs Commissionerate office in Hyderabad. Two petitioners, importers of nut pieces from Vietnam, challenged show cause notices dated 26.05.2023 issued under Section 28(4) of the Customs Act, 1962, alleging that they had imported broken cashew nuts but wrongly declared and classified them as 'agricultural rejected nut pieces, residues and waste, unfit for human consumption' under CTH 23080000 (which is duty-exempt) instead of the correct classification under CTH 08013210 (attracting Basic Customs Duty at 30%, Social Welfare Surcharge at 10%, and IGST at 5%).

The petitioners had imported the goods claiming an exemption applicable to agricultural waste unfit for human consumption, supported by laboratory test reports from two different laboratories confirming the product was unfit for human consumption. The Customs Department alleged, however, that the petitioners had in fact sold the goods in the open market for human consumption rather than to agencies dealing in animal feed, in violation of their own declaration, and without sufficient invoices to prove sales only to animal-feed agencies.

Issues Involved

  1. Whether the writ court should interfere with the impugned show cause notices at the threshold, before the petitioners had responded to them before the adjudicating authority.
  2. Whether the classification dispute and the allegations of misuse should be examined in writ jurisdiction or left for adjudication under the Customs Act.

Petitioner's Arguments

  • The show cause notices were issued by an authority not competent under the Customs Act and did not deal with the petitioners' response and laboratory test reports from the pre-notice consultation stage.
  • Since the product had already been tested at two laboratories and found unfit for human consumption, this alone was sufficient to show the goods were correctly classified and duty-exempt, making the show cause notice proceedings per se bad in law.

Respondent's Arguments

  • The Department raised the preliminary objection of maintainability of a writ petition at the mere show-cause-notice stage.
  • On facts, the petitioners had not been able to satisfactorily demonstrate, even at the pre-notice consultation stage, that the goods had actually been sold to agencies dealing in animal feed; available invoices reflected small cash sales to individuals rather than institutional animal-feed buyers, suggesting the goods (declared unfit for human consumption) had in fact been sold for human consumption in the open market.

Court Order / Findings

  • Relying on the Supreme Court's decisions in Malladi Drugs and Pharma Limited v. Union of India and Commissioner of Central Excise v. Krishna Wax Private Limited, the Court reiterated the settled principle that a writ court should not ordinarily entertain a challenge to a mere show cause notice, and that the noticee should first raise all objections before the authority who issued it.
  • Given the serious allegations in the show cause notices — including that the petitioners had sold the goods in the open market for human consumption contrary to their own declaration, without adequate documentary support for sales to animal-feed agencies — the Court declined to interfere at this stage.
  • Both writ petitions were dismissed at the stage of admission, with the petitioners' right expressly reserved to respond to the show cause notices and avail all remedies available under the Customs Act.

Important Clarification

This order settles nothing about the correct Customs classification of the imported goods or the applicability of duty/IGST — both questions were left entirely open for the adjudicating authority to decide after considering the petitioners' reply. It is a maintainability ruling based on the settled principle that show cause notices are ordinarily not challengeable in writ jurisdiction, and it has no application to GST assessment or interpretation.

Sections Involved

  • Section 28(4) of the Customs Act, 1962 (show cause notice for short-levy/mis-declaration)
  • Customs Tariff Sub-Headings 23080000 and 08013210 under the Customs Tariff Act, 1975

Decision – In Favour of

Decided in favour of the Department on the threshold question of maintainability — both writ petitions were dismissed at admission, without any decision on the merits of the classification/mis-declaration dispute, which remains open for adjudication.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case No.: Writ Petition Nos. 20748 of 2023 and 21245 of 2023
Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice Laxmi Narayana Alishetty
Date of Order: 16.08.2023

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