The Gujarat High Court has dismissed a tax appeal filed by the Customs Department, clearing the way for duty-free import of in-shell walnuts under the Transferable Duty Free Import Authorisation (DFIA) scheme. The court held that the advance ruling allowing the exemption was legally sound and backed by settled precedent.
The decision came in an appeal filed by the Commissioner of Customs, Kandla against M/s Devam Impex, a proprietary firm engaged in import-export trade.
Background of the Case
M/s Devam Impex, holding a valid Importer-Exporter Code, had applied for an advance ruling on whether it could import in-shell walnuts without paying Basic Customs Duty. The firm relied on DFIA licences issued against exports of assorted confectionery products and biscuits.
The import was claimed under two permitted categories:
- “Other Confectionery Ingredients” including fruits and nut products under SION E-1, and
- “Dietary Fibre” under biscuit additives and ingredients under SION E-5.
In April 2025, the Customs Authority for Advance Rulings (CAAR), Mumbai ruled in favour of the importer, holding that in-shell walnuts were permissible inputs under the DFIA licences, subject to value limits.
Challenging the ruling, the Customs Department argued that walnuts could not automatically qualify as “dietary fibre” or confectionery ingredients. It claimed the exemption notification required strict interpretation and specific correlation between imported goods and actual materials used in exported products.
“The exemption was granted without matching the HS code or establishing technical usage,” the department submitted, warning that such a broad interpretation could lead to misuse of the DFIA scheme.
The department also relied on later policy developments and argued that exemption notifications must be construed narrowly.
Senior counsel for Devam Impex countered that the issue was no longer open for debate. He pointed to multiple High Court and tribunal rulings where walnuts, including in-shell form, had been recognised as dietary fibre and nut products under DFIA norms.
The defence highlighted that DFIA licences are transferable and do not impose an actual-user condition. It was further argued that customs authorities cannot question classifications once the licensing authority has approved the input description.
Court’s Observations
The division bench noted that identical questions had already been settled by earlier High Court decisions, particularly by the Bombay High Court in similar DFIA disputes.
“The scope of appeal against an advance ruling is extremely limited,” the bench observed, adding that interference is justified only if the ruling is arbitrary, illegal, or unsupported by reasoning.
The judges also referred to a later CBIC circular clarifying that technical correlation is required only for specific inputs listed under the Foreign Trade Policy. In-shell walnuts did not fall in that restricted category.
Importantly, the court found no violation of value limits prescribed under the DFIA licences and noted that the Customs Department had failed to produce any contrary technical evidence.
Final Decision
Concluding that the advance ruling was consistent with established law and policy, the Gujarat High Court declined to frame any substantial question of law.
The tax appeal filed by the Customs Department was dismissed, and the connected stay application was also disposed of.
Case Title: Commissioner of Customs, Kandla vs M/s Devam Impex
Case No.: R/Tax Appeal No. 507 of 2025
Case Type: Customs Tax Appeal
Decision Date: 24 December 2025
