Delhi High Court Flags Validity Of Reports In IGST Refund Denial On Export Of Mouth Fresheners/Pan Masala; Directs Expeditious Examination
The Delhi High Court in a matter involving export of mouth freshner/pan masala, where two differing Test Reports were issued and refund of Integrated Goods and Services Tax (IGST) was denied, has flagged validity of Central Revenues Control Laboratory (CRCL) test reports. Justice Prathiba M. Singh and Justice Shail Jain were hearing writ petitions filed by Exporters/Petitioners...
The Delhi High Court in a matter involving export of mouth freshner/pan masala, where two differing Test Reports were issued and refund of Integrated Goods and Services Tax (IGST) was denied, has flagged validity of Central Revenues Control Laboratory (CRCL) test reports.
Justice Prathiba M. Singh and Justice Shail Jain were hearing writ petitions filed by Exporters/Petitioners of tobacco products including pan masala and mouth fresheners who had challenged the letter issued by Customs directing not to issue IGST refund basis test report classifying their product as Gutka . The Petitioners put forth that second test report which arrived at a conclusion that products imported were 'Gutka' and not 'Mouth Freshners Pan Masala' was not tenable in absence of drawl of fresh samples. The Delhi High Court noted that since no Show Cause Notice had been issued as yet, the same ought to be done by January 10, 2026. Further, the Customs Department instructed to consider all representations of Petitioners by February 28, 2026.
They filed shipping bills for the purpose of export of goods described as Mouth Fresheners, Pan Masala RG and Tobacco. The goods were exported through the shipping bills but only on a provisional basis.
Thereafter, Central Revenues Control Laboratory (CRCL), Government of India, Ministry of Finance, Department of Revenue gave two differing test reports for 'Mouth Freshners Pan Masala' samples one of 2024 which found samples to contain betel nut, nicotine, catechu, lime, flavouring substances to be characterised as tobacco-containing mouth fresheners/pan masala, but no adverse classification. At the time of provisional release of the goods, certain bank guarantees were furnished by the Petitioners. Since there was no objection in the first CRCL report, they sought finalisation of the shipping bills and release of the bank guarantees. However, the second test report clarified that “Based on the test findings each sample u/r has the characteristics of Gutka”.
Pursuant to the second test report, the Customs Department communicated to the GST Department regarding withholding of Integrated Goods and Services Tax (IGST) Refund.
Hence, the present writ petitions seeking release of bank guarantees and withdrawal of the letters issued to the GST Department. According to the Petitioners, the second Test Report of 2025 was without drawing any further samples. It was also contended that the first CRCL reports would be binding on the Petitioners and the clarification in the form of second CRCL reports gave no reasoning as to why such a finding has been arrived at, that the products of the Petitioners were Gutka.
On non-consideration of representation regarding release of bank guarantees, the Delhi High Court took note of Petitioner's submission that several representations were made to the Commissioner of Customs but it were 'neither replied nor decided till date'. In this vein, the High Court also noted that:
“If any SCN is to be issued to the Petitioners, the same ought to be done expeditiously so that further shipments of the Petitioners are not unnecessarily put on hold.”
Accordingly, the High Court disposed off the writ petitions without any opinion on merits.
Case Detail: National Fregrance vs. Union of India & Ors.
For Petitioner: Advocates Rahul Raheja, Rohit Raheja, Gaurav Prakash
For Respondent: SPC Sai Manik Sud