Customs | Export Of Rare Earth Elements Like Garnet Barred: CESTAT Ahmedabad Cites Dept Of Atomic Energy Circular

The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that export restrictions on garnet, whether found along beaches or inland places without involving canalising agency i.e. Indian Rare Earths Limited (IREL) was banned. In a recent ruling, the coram of Dr. Ajaya Krishna Vishvesha (Judicial Member) and Mr. Satendra Vikram Singh (Technical Member) referred to a 2020 Circular issued by the Department of Atomic Energy to state that DGFT imposed restriction through a Notification dealt with sensitive materials seen from the perspective of national security and canalized exports through designated agencies only. The CESTAT critiqued conduct of the exporter noting that despite having knowledge of the restrictions, when test reports too indicated that goods had characteristics of Natural Almandine Pyrope Garnet, goods were exported without canalizing agency. Therefore, the charge of misdeclaration was also confirmed against the exporter. Rare Earth Elements, which have critical importance in Atomic Energy, Defence, and Space Sector and mining of such minerals could lead to a security hazard. This was the reason why garnet was canalized and its export was regulated since when the garnet was mined, the increase in density of Radioactive material, may lead to unwanted exposure to radiation. Against this backdrop, Directorate General of Foreign Trade (DGFT) vide Notification No. 26/2015-2020 dated August 21, 2018, revised the export policy for 'Beach Sand Minerals' (BSM) under Chapter 26 of ITC (HS) Schedule 2, placing them under State Trading Enterprise (STE) canalization exclusively through Indian Rare Earths Limited (IREL). Customs Department alleged that exporter filed false and erroneous declaration in respect of export items which were prohibited vide DGFT Notification. A Show Cause Notice was issued rejecting the classification adopted by the exporter under CTH 25132090 and reclassified them under Chapter Heading 25132030. The exporter contended that 'Beach Sand Minerals' mentioned in the DGFT notification applied only to minerals produced from Beach Sand and not to the ones sourced from inland areas of Rajasthan. It was submitted that their product was made after crushing rocks found in Rajasthan. Further, a reply to parliamentary question was relied on to state that only BSM was canalized. Addressing the two grounds raised by the exporter, the Customs Department put forth that export of any garnet was restricted, irrespective of its origin i.e. from beach or from inland places. As for the contention that garnet found only at beaches was regulated, Scientific studies were referred to, explaining that the export of garnet had been regulated irrespective of its origin. The CESTAT Ahmedabad perused DGFT Notification and test reports of samples drawn to observe that Garnet in question being of Rajasthan origin would not take it out of scope of DGFT notification whose intention was to restrict export of Garnet irrespective of its origin. Emphasizing on the intention of the law-making body and strict interpretation of DGFT Notification, the CESTAT Ahmedabad referred to a February 2025, recent research paper published in Journal of Geochemical Exploration while deliberating on discouraging exploitation of Rare Earth Elements. It was highlighted that DGFT Notification not only uses the generic term 'Beach Sand Mineral' but also specifically mentions 'Garnet' with Tariff Code in the Notification. “ 4.9 In view of the above submissions, we agree with the department that scope of DGFT notification is to restrict export of Garnet without bothering about its origin whether of beach origin or otherwise, specially we find that for "Garnet"….when the Garnet has been given a specific subheading i.e. 25132030, classifying it as Natural abrasive in another sub-heading is incorrect and amounts to mis-declaration.” As for a 2022 Parliamentary reply referred to by exporter, the CESTAT clarified that Minister of State, Earth Sciences released a Press Release that stated Rajasthan was also a source of Rare Earth Elements (in the form of oxides). Accordingly, the CESTAT Ahmedabad confirmed confiscation of consignment carrying garnet for making “Natural Abrasive” along with a redemption fine ₹2,00,000 and penalties of ₹50,000 each on the exporter under Sections 114(i) & 114AA of the Customs Act, 1962. Case Detail: Payal Synthetics Private Limited vs. Commissioner of Customs, Ahmedabad For Appellant: Advocate S. Suryanarayanan For Respondent: Mr. Aakash Singh (Authorized Representative)Click Here To Read/Download Order

Customs | Export Of Rare Earth Elements Like Garnet Barred: CESTAT Ahmedabad Cites Dept Of Atomic Energy Circular

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Customs | Export Of Rare Earth Elements Like Garnet Barred: CESTAT Ahmedabad Cites Dept Of Atomic Energy Circular

Parul Bose

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