Export Of Garnet Barred Irrespective Of Origin; Must Be Canalised Through IREL: CESTAT Ahmedabad
Pranav B Prem
The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that export of garnet is restricted irrespective of whether it is sourced from beach sand or inland areas and that such export can be undertaken only through the designated canalising agency, Indian Rare Earths Limited (IREL). Dismissing the appeal filed by M/s Payal Synthetics Private Limited, the Tribunal upheld confiscation of the exported consignment, imposition of redemption fine, and penalties for misdeclaration under the Customs Act, 1962.
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The Bench comprising Dr. Ajaya Krishna Vishvesha (Judicial Member) and Satendra Vikram Singh (Technical Member) examined the legality of export of garnet declared as “Natural Abrasive” by the exporter and classified under Customs Tariff Heading (CTH) 25132090. The case arose from two shipping bills filed in January 2019 for export of consignments weighing 140 MT and 138 MT respectively from Surat. The exports were permitted provisionally subject to test reports, as the exporter pleaded urgency due to a connecting vessel and potential demurrage.
Samples drawn from the consignments were sent to the Central Revenue Control Laboratory (CRCL), Vadodara. The test reports received in April 2019 concluded that the goods were pinkish red coarse powder having the characteristics of Natural Almandine Pyrope Garnet. Based on these findings, the Customs Department issued a show cause notice alleging false declaration and violation of DGFT Notification No. 26/2015–2020 dated 21.08.2018, which had revised the export policy for Beach Sand Minerals under Chapter 26 of ITC (HS), placing garnet under State Trading Enterprise (STE) canalisation through IREL.
The adjudicating authority rejected the classification adopted by the exporter, reclassified the goods under CTH 25132030 (Natural Garnet), ordered confiscation under Sections 113(d) and 113(i) of the Customs Act, imposed a redemption fine of ₹2 lakh, and levied penalties of ₹50,000 each under Sections 114(i) and 114AA. This order was upheld by the Commissioner (Appeals), leading to the present appeal before the Tribunal.
Before the CESTAT, the exporter contended that the DGFT notification applied only to Beach Sand Minerals and not to garnet sourced from inland areas such as Rajasthan. It was argued that the raw material was procured in the form of rocks and lumps from Bhilwara, Rajasthan, and therefore did not fall within the scope of canalisation. Reliance was also placed on replies to Parliamentary questions and statutory notifications under mining laws to contend that only beach-sourced minerals were regulated.
The Customs Department, on the other hand, submitted that garnet was regulated not because of its location of origin but due to the presence of Rare Earth Elements (REEs), which have strategic importance for atomic energy, defence, and space sectors. It was argued that scientific studies and advisories from the Department of Atomic Energy demonstrated that REEs, including monazite, could also be present in inland garnet deposits. The Department emphasised that the DGFT notification specifically mentioned “Garnet” with a tariff code, indicating an intention to restrict its export irrespective of origin.
After examining the notification, test reports, and scientific material placed on record, the Tribunal rejected the exporter’s contention that inland-origin garnet was outside the purview of export restrictions. It noted that the DGFT notification did not confine the restriction to garnet mined only from beaches and that the use of the generic term “Beach Sand Minerals” did not dilute the specific inclusion of garnet as a canalised item. The Tribunal observed that when a specific tariff entry for garnet exists, classification under a residual or different heading to bypass canalisation requirements amounts to misdeclaration.
The Bench also took note of scientific research and official material indicating that significant REE deposits exist inland and that garnet mining could increase the density of radioactive minerals such as monazite, posing potential security and environmental hazards. It held that the intention behind the DGFT notification, issued on the basis of recommendations from atomic energy authorities, was to regulate and discourage unregulated exploitation of such sensitive minerals.
In clear terms, the Tribunal held that export of garnet is restricted irrespective of whether it is of beach origin or inland origin, and that canalisation through IREL is mandatory. It further held that classifying garnet under a different tariff heading as “Natural Abrasive” to avoid canalisation was incorrect and constituted misdeclaration. Consequently, the CESTAT upheld confiscation of the exported goods, the redemption fine of ₹2 lakh imposed in lieu of confiscation, and penalties of ₹50,000 each under Sections 114(i) and 114AA of the Customs Act. Finding no merit in the appeal, the Tribunal dismissed it in entirety.
The ruling reinforces the principle that export restrictions imposed in the interest of national security and regulation of rare earth resources must be interpreted strictly, and that the origin of the mineral does not dilute statutory canalisation requirements.
Appearance
For Appellant: Advocate S. Suryanarayanan
For Respondent: Mr. Aakash Singh (Authorized Representative)
Cause Title: Payal Synthetics Private Limited vs. Commissioner of Customs, Ahmedabad
Case No: Customs Appeal No. 10135 of 2024-DB
Coram: Dr. Ajaya Krishna Vishvesha (Judicial Member), Satendra Vikram Singh (Technical Member)
