CESTAT Ahmedabad affirms that DGFT notification regulates garnet exports irrespective of origin, upholding penalties for mis-declaration.
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad, has upheld the confiscation and penalties imposed on M/s. Payal Synthetics Private Limited for misclassifying garnet exports to circumvent export regulations. The tribunal dismissed the appeal filed by the company, reinforcing the regulatory framework established by the Directorate General of Foreign Trade (DGFT) concerning the export of garnet, a mineral of strategic significance.
The case arose when Payal Synthetics attempted to export consignments of garnet, classified under Customs Tariff Heading (CTH) 25132090, as "Natural Abrasive," contrary to the prescribed classification under CTH 25132030. The DGFT Notification No. 26/2015-20, dated August 21, 2018, mandates that garnet exports, regardless of their geographical origin, be canalized through Indian Rare Earths Limited (IREL) due to the presence of Rare Earth Elements (REEs) crucial for national security.
The Customs department, upon discovering the misclassification, issued a Show Cause Notice to Payal Synthetics, leading to the confiscation of goods valued at approximately Rs. 52 lakh and the imposition of penalties. The adjudicating authority had earlier confirmed the classification under CTH 25132030, confiscated the goods, and levied a redemption fine and penalties, which were upheld by the Commissioner (Appeals).
Payal Synthetics contended that their garnet was sourced from inland regions of Rajasthan, arguing that the DGFT notification applied solely to garnet from beach sands. However, the tribunal referenced scientific studies indicating the presence of REEs in both coastal and inland garnet deposits, thereby affirming the broader regulatory intent of the DGFT notification.
The tribunal's decision highlighted the strategic importance of regulating the export of garnet to prevent unauthorized exploitation of materials containing REEs, which are vital for atomic energy and defense sectors. It further emphasized the necessity for strict adherence to the prescribed classification and export channels to safeguard national interests.
With this ruling, the tribunal has reinforced the legal framework ensuring that sensitive minerals like garnet are exported in compliance with national security protocols, marking a significant precedent for future cases involving mineral export regulations.
Bottom Line:
Export of Garnet under DGFT Notification No. 26/2015-20 dated 21.08.2018 is regulated irrespective of its origin (beach or inland) and can only be exported through Indian Rare Earths Limited (IREL). Misclassification of goods to circumvent the provision of canalization amounts to mis-declaration.
Statutory provision(s): Customs Act, 1962 Sections 113(d), 113(i), 114(i), 114AA.
