Bombay HC Halts DGFT's Attempt to Reclassify Areca Nuts, Citing Jurisdictional Overreach

Mumbai, India – In a significant ruling that delineates the powers of administrative bodies in foreign trade, the Bombay High Court has granted an ad-interim stay on a notification issued by the Directorate General of Foreign Trade (DGFT) that sought to alter the customs classification of "Roasted Areca Nuts." The Division Bench, comprising Justices B.P. Colabawalla and Amit S. Jamsandekar, found a strong prima facie case that the DGFT had exceeded its statutory authority, venturing into a domain exclusively reserved for the Central Government.

The decision, delivered in the case of Shri. Indu Shekhar v. Union of India & Anr. , provides crucial clarity on the separation of powers between the DGFT's role in regulating trade policy and the Central Government's legislative function in amending the Customs Tariff Act, 1975.

The Contested Notification and the Core Legal Challenge

The controversy began with Notification No.02/2025-26, dated April 2, 2025, issued by the DGFT. This notification attempted to reclassify "Roasted Areca Nuts" from Chapter Heading 20081920 to Chapter Heading 08028090 of the Customs Tariff. This seemingly administrative change carries substantial implications for importers, affecting duty rates, import policies, and compliance requirements.

The petitioner, represented by Senior Advocate Mr. D. B. Shroff, challenged the notification as being ultra vires the Constitution, specifically Articles 14 (Right to Equality) and 19 (Right to Freedom). The central pillar of the petitioner's argument was that while the DGFT is empowered to prohibit or restrict the import of goods, it possesses no authority to unilaterally change the fundamental classification of those goods.

The petitioner contended that the power to amend the First Schedule of the Customs Tariff Act, 1975—which contains the classification headings—is explicitly vested in the Central Government under Section 11A of the Act. This section outlines a specific procedure for such amendments, underscoring its legislative nature. The DGFT's action, the petitioner argued, was an unauthorized usurpation of this legislative power.

An interesting footnote to the case is that the DGFT itself appeared to recognize its error, issuing a subsequent notification on October 15, 2025, to rectify the change. However, the legal challenge against the original notification proceeded, culminating in the High Court's intervention.

The High Court's Prima Facie Analysis

The High Court meticulously examined the legal framework under which the DGFT issued the impugned notification. The DGFT had invoked powers under Section 3 read with Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), along with paragraphs 1.02 and 2.01 of the Foreign Trade Policy (FTP) 2015-20.

However, upon review, the bench concluded that these provisions do not grant the DGFT the authority to reclassify goods. The court opined that these sections empower the DGFT to formulate and announce the FTP and make provisions relating to imports and exports, but not to redefine the very identity of a product within the customs tariff structure.

In its analysis, the bench noted, "...none of these paragraphs, at least prima facie, permit the DGFT to issue a notification changing the classification of the goods from Chapter 20 to Chapter 08, or for that matter, from any one chapter to another chapter."

The court explicitly contrasted the DGFT's limited powers with the specific authority granted to the Central Government. "This power is with the Central Government only under Section 11A of the Customs Tariff Act, 1975," the bench affirmed, reinforcing the petitioner's core argument. Finding that the petitioner had established a "strong prima facie case," the court granted a stay on the notification's operation.

Implications for Importers and Provisional Release

The stay has immediate practical consequences for importers of roasted areca nuts who were affected by the reclassification. The High Court, recognizing the potential for commercial disruption, directed the provisional release of the petitioner's imported consignments.

In a move to protect the interests of the importers while the matter is sub-judice, the bench stated, "since we have stayed the operation of the impugned notifications issued by the DGFT, we direct that the Petitioners shall be entitled to provisionally release the Roasted Areca Nuts imported by the Petitioners, on furnishing a bond in the format required by the Customs Department."

Crucially, the court added a clear rider to prevent onerous conditions from being imposed on the importers: "We make it clear that no other conditions shall be imposed for provisionally releasing the Roasted Areca Nuts imported by the Petitioners…" This directive ensures that the provisional release is not unduly burdensome, allowing trade to continue with a degree of certainty pending the final resolution of the writ petition.

Broader Legal Ramifications: A Check on Administrative Power

This ruling serves as a vital judicial check on potential administrative overreach. While the DGFT plays a pivotal role in executing India's foreign trade policy, its actions must remain within the four corners of the statutes that empower it. The reclassification of goods is not a mere procedural formality; it is a substantive change with significant financial and legal consequences that, as the court highlighted, belongs in the legislative domain of the Central Government.

For legal practitioners in customs, excise, and foreign trade law, this order reinforces a fundamental principle: the source of power for any administrative action must be clearly identifiable in the governing statute. The DGFT's power is to regulate trade within the existing tariff framework, not to rewrite the framework itself. Any attempt to do so, as seen in this case, is vulnerable to a successful legal challenge on the grounds of being ultra vires .

The case underscores the importance for businesses to scrutinize notifications and policy changes, and to be prepared to challenge administrative actions that appear to exceed delegated authority. The Bombay High Court's interim order protects the petitioner from the immediate effects of a potentially unlawful notification and sets a cautionary precedent for administrative bodies to operate strictly within their legislatively defined spheres of influence.