Bombay HC orders provisional release of seized Ethanol Absolute under CTH 98.02 classification pending classification determination

Bombay HC ordered provisional release of seized Ethanol Absolute imported under CTH 98.02 classification. Petitioner, a regular importer, challenged seizure memo alleging mis-classification. Court noted goods were consistently cleared under same classification for years without show cause notice. HC held classification must be determined at time of import, not based on subsequent use by buyers. Following precedent in similar cases, court directed provisional release upon execution of bond to secure differential duty, with goods to be released within two weeks. All classification contentions kept open for appropriate proceedings.

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Issues Involved:
1. Legality and validity of the seizure memo dated 28th September 2023.
2. Classification of Ethanol Absolute under Customs Tariff Heading (CTH) 98.02 versus CTH 22.07.
3. Provisional release of Ethanol Absolute pending investigation.
4. Compliance with prior court orders and customs regulations.

Detailed Analysis:

1. Legality and Validity of the Seizure Memo:
The Petitioner challenged the seizure memo dated 28th September 2023 issued by Respondent No. 4 under Article 226 of the Constitution of India. The Petitioner argued that the seizure was arbitrary, without jurisdiction, and contrary to the orders passed by the Court. The Petitioner submitted that the seizure was based on an erroneous belief that the goods were misclassified under CTH 22.07 instead of CTH 98.02, despite previous consistent classification and clearance under CTH 98.02.

2. Classification of Ethanol Absolute:
The Petitioner has been importing Ethanol Absolute with a purity of 99.9% in 500 ml bottles, marked for laboratory use, and classified under CTH 98.02 for the past three years. The Petitioner argued that the goods met the requirements of Note 3 to Chapter 98, which covers chemicals imported in packings not exceeding 500 ml and meant solely for laboratory use. The Respondents, however, seized the goods on the belief that they should be classified under CTH 22.07. The Court noted that the classification under CTH 98.02 had been accepted by the Respondents for previous imports and there was no justification for the sudden change.

3. Provisional Release of Ethanol Absolute:
The Petitioner sought provisional release of the Ethanol Absolute, citing the Court's previous judgments in similar cases (e.g., M/s. K. Raj and Co.). The Court agreed with the Petitioner, noting that the goods were not prohibited and the only dispute was over classification. The Court found that the Respondents were not justified in refusing provisional release based on ongoing investigations, especially since the Petitioner had complied with all necessary requirements for classification under CTH 98.02.

4. Compliance with Prior Court Orders and Customs Regulations:
The Court observed that the Petitioner had not been issued any Show Cause Notice and had not been provided with the Investigation Report dated 27th October 2023. The Court also noted that the Petitioner had been a regular importer and not a fly-by-night operator. The Court referenced its previous orders allowing provisional release of similar goods under execution of a bond and found no reason to deviate from this precedent.

Conclusion:
The Court ruled in favor of the Petitioner, granting the following orders:
- The Petitioner is entitled to provisional release of the Ethanol Absolute under Bill of Entry No. 7515045 dated 25th August 2023 upon execution of a bond to secure the differential duty and any consequential amounts.
- The Respondents are directed to release the goods within two weeks from the execution of such a bond.
- All contentions regarding classification are kept open for consideration in appropriate proceedings.
- The rule is made absolute, and the Writ Petition is disposed of without any order as to costs.

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