K.P. Impex Vs Principal Commissioner of Customs (Preventive) (Madras High Court)
Conclusion: Provisional release order by substituting the bank guarantee requirement with a bond of equivalent amount, while retaining other conditions. The Court emphasized that onerous financial conditions prior to adjudication are unwarranted, especially for non-prohibited goods, and directed release upon compliance within seven days.
Held: Assessee imported 793 rolls (69,903 sqm) of PVC Coated Fabrics from China under an invoice and filed Bill of Entry for home consumption at Chennai Port. The consignment was moved to an SEZ warehouse at Nandiampakkam, Chennai. The Customs Department initiated investigation for alleged misclassification and undervaluation, and the goods were seized under Section 110. Subsequently, a provisional release order was issued, directing release upon payment of re-determined duty, execution of bond for ₹39,00,000, and furnishing bank guarantee for ₹11,00,000. Assessee challenged the order, seeking release of goods without bank guarantee and without payment of duty on re-determined value, contending that the conditions imposed were onerous and contrary to law. Assessee contended that the impugned order was based on CBIC Circular No. 35/2017-Cus., which was struck down by the Delhi High Court in ADG (Adjudication) v. Its My Name Pvt. Ltd. [2021 (375) ELT 545 (Del.)] as being contrary to Section 110A of the Customs Act. The Supreme Court had affirmed the Delhi High Court decision; thus, reliance on the circular was illegal and imposing a bank guarantee condition before adjudication was arbitrary and contrary to established judicial precedents. It was held that the dispute pertained only to the conditions imposed for provisional release and not the merits of the seizure or valuation. Referring to earlier decisions in Green Line v. Commissioner of Customs [2016 (340) ELT 140 (Mad.)], and Commissioner of Customs v. Sri Venkateshwara Paper Boards [2022 (379) ELT 310 (Mad.)], the Court observed that bank guarantee conditions in provisional release of non-prohibited goods had been held harsh and excessive when adjudication was still pending. Applying the same principle, the Court held that the interest of the Department would be sufficiently protected if assessee paid entire duty as declared, paid 50% of the differential duty, executed bond for ₹39,00,000, and executed bond for ₹11,00,000 in lieu of bank guarantee. The Court accordingly modified the impugned order and directed the respondents to release the goods within seven days upon compliance.
