High Court Directs Customs to Decide Bank Guarantee Release in Exporters’ Pan Masala Dispute

M/s National Fregrance and M/s Dacik Foods Pvt. Ltd., exporters of tobacco-related products such as pan masala and mouth fresheners, approached the High Court after Customs withheld finalisation of their shipping bills and IGST refunds. Although the goods were exported in October 2024, they were released only provisionally against bank guarantees following an alert. Initial CRCL test reports described the samples as containing tobacco but did not classify them as gutka. Relying on these reports, the petitioners sought finalisation of shipping bills and release of the guarantees.

However, CRCL later issued a clarification in November 2025 stating that the same samples had the characteristics of gutka. Based on this clarification, Customs asked GST authorities to withhold IGST refunds, prompting the petitioners to file the present writ petitions.

Main Issue: Whether Customs could rely on a later CRCL clarification, issued without fresh sampling or reasons, to stall finalisation of exports, release of bank guarantees, and IGST refunds.

HC’s Ruling: The High Court noted that the petitioners’ representations seeking release of bank guarantees were still pending and that no show cause notice had been issued.

Without examining the merits of the classification dispute, the Court directed the Commissioner of Customs to decide the pending representations by 28 February 2026. It further directed that if a show cause notice was proposed, it must be issued by 10 January 2026 and decided along with the representations.

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