CESTAT Upholds Export Restrictions On Garnet, Regardless Of Origin

Introduction

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has clearly stated in an important decision in relation to the strategic minerals and export control regime in India that limitations on the export of garnet are applicable regardless of the origin of the mineral being coastal beach sands or inland. The Tribunal reaffirmed that garnet is a controlled mineral considering that it is related to Rare Earth Elements (REEs) and the related issues of national security and radiological safety.

In Payal Synthetics Private limited v. Commissioner of Customs, Ahmedabad, the scope and intent of the canalisation policy of DGFT and gives a strong and stern compliance message to the exporters of sensitive minerals.

Case Timeline

• 21 August 2018– DGFT issues the Notification No. 26/2015-2020, revising the export policy of Beach Sand Minerals under Chapter 26 of ITC (HS) and garnet under State Trading Enterprise (STE) canalisation using Indian Rare Earths Limited (IREL).
• 18 January 2019– Payal Synthetics Pvt. Ltd. makes two export shipping bills of the goods under export which are classified under CTH 25132090 with the goods being Natural Abrasives.
• 25 January 2019– The temporary export was approved by the Customs pending the test of the laboratory.
• 4 April 2019– The exported goods are Natural Almandine Pyrope Garnet, which is confirmed by the test reports.
• 7 January 2021– Show Cause Notice issued based on mis-declaration and export of banned goods.
• 6 January 2022-The Adjudicating Authority confiscates property, fines and imposes penalties.
• 23 November 2023-Appeals Commissioner affirms the adjudication order.
• 22 December 2025– CESTAT Ahmedabad blocks the appeal and confirms the restrictions.

Issues Raised

• The DGFT restriction on the export of garnet related to garnet mined in beach sand minerals or garnet mined in inland areas.
• Through classification of garnet as being classified as “Natural Abrasives under a different tariff heading: mis-declaration.
• Whether the seizure of goods and imposing penalty under the Customs Act, 1962 was reasonably justified.

Appellant’s Arguments

• The appellant argued that the DGFT notification is limited to Beach Sand Minerals and not to garnet mined on rocks extracted in the inland regions like Rajasthan.
• They claimed that the exported commodity was a manufactured natural garnet and not a beach one.
• They were dependent on parliamentary responses and statutory notifications in relation to mining laws to hint that it was only coastal beach sand minerals that were to be canalised.
• The appellant also claimed that the circular issued by the Department of Atomic Energy was not adopted until later, thus it could not be retroactively applied to exportations made in 2019.

Respondent’s Arguments

• The Customs Department has filed that DGFT Notification No. 26/2015-2020 expressly states that garnet is covered together with its tariff heading but does not restrict the restriction to a single geographical source of the same.
• It was contended that garnet has the potential of having Rare Earth Elements such as the radioactive monazite regardless of the region (coastal or inland).
• The use of scientific research and professional viewpoints was used to prove that reforms that occur in inland geological formations also have REE.
• The Department claimed that the exporter knew the restrictions existed and tried to circumvent the canalisation by using a wrong tariff classification.

Judgment

The appeal by the CESTAT Ahmedabad rejected the appeal and affirmed the lower decisions. The Tribunal held that:

• The DGFT notification aims at limiting the exportation of garnet regardless of the source.
• When garnet is specially classified as tariff heading 25132030, mis-declaration is to be classified as such by classifying garnet under a different heading.
• Strict interpretation of export control notifications is justified in favour of national security concerns and radiation safety.
• The seizure of goods, redemption fine of 200,000 and penalties of 50 000 respectively were legally viable in accordance with 114(i) and 114AA of the Customs Act, 1962.

Analysis

This ruling gives clarity regarding the exportation controls that are applicable to minerals associated with Rare Earth Elements. The Tribunal has ensured that trade regulation is consistent with scientific evidence and national security policy by disregarding the difference in the coastal versus inland origin.

Another valuable compliance principle supported by the ruling is that exporters cannot use an alternative classification of tariffs to water down or avoid export restrictions in statutes. In a case where a notification directly addresses a mineral and gives it a particular tariff heading, its purpose should override form or nomenclature.

According to the energy and resources law, the decision can be discussed as the increased focus of India on the preservation of strategic minerals, which are also vital in the production of atomic energy, clean technologies, defence, and research of space.

Conclusion

The CESTAT Ahmedabad decision ascertains that garnet, being linked with Rare Earth Elements, is heavily regulated irrespective of its place of origin. Exporters of such minerals are required to follow the requirements of the DGFT canalisation precisely and fully.

The ruling enhances regulatory predictability and buttresses the wider policy aim of India to safeguard sensitive mineral resources to the national energy security and strategic industries.