CESTAT reduces bank guarantee for provisional release of seized goods under Section 110A, allows immovable property security

CESTAT Ahmedabad partially allowed appeal for provisional release of seized goods under Section 110A of Customs Act, 1962. Tribunal modified Commissioner's order by reducing bank guarantee requirement and permitting immovable property as security. Bond conditions imposed by Commissioner remain valid until duty, penalty, interest and redemption fine are paid. Tribunal directed supporting manufacturer to provide undertaking regarding machinery infrastructure and processing capability. Revenue protection maintained through modified security arrangements. Goods provisionally released with reduced financial burden on appellant.

---

---

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the provisional release of seized goods under Section 110A of the Customs Act, 1962, is appropriate given the ongoing investigation by the Directorate of Revenue Intelligence (DRI).
• The appropriateness of the bank guarantee and bond requirements imposed by the Commissioner of Customs for the provisional release of goods.
• Whether the conditions imposed for the provisional release align with the guidelines provided in Board Circular No. 35/2017-Cus dated 16.08.2017.
• The impact of subsequent amendments to the advance authorization on the obligations and duties of the appellant.
• The balance between safeguarding revenue interests and facilitating business operations, including exports.

ISSUE-WISE DETAILED ANALYSIS

Provisional Release of Seized Goods

The legal framework for provisional release under Section 110A of the Customs Act, 1962, allows for the release of goods pending investigation, subject to conditions such as furnishing a bond and bank guarantee. The Court acknowledged the perishable nature of the goods (chickpeas) and their eligibility for provisional release under the said section.

The Court noted that the DRI's ongoing investigation into the alleged violation of the advance authorization scheme does not preclude provisional release, especially given the perishable nature of the goods.

Bank Guarantee and Bond Requirements

The Commissioner of Customs required a bank guarantee of Rs. 1,06,56,771/- and a bond equal to the value of the goods (Rs. 2,42,19,936/-). The Court examined the reliance on Board Circular No. 35/2017-Cus, which outlines the requirement for a bond and bank guarantee to cover potential duty, fine, and penalties.

The Court found that the Commissioner had adhered to the Circular's guidelines but failed to provide specific reasoning for the bank guarantee amount, as required by para 2.3 of the Circular. The Court emphasized the necessity for the adjudicating authority to exercise independent judgment rather than solely relying on the Circular.

Amendments to Advance Authorization

The appellant argued that subsequent amendments to their advance authorization, including naming M/s. Vasundhara Industries as the supporting manufacturer, were not considered by the adjudicating authority. The Court recognized the potential impact of these amendments on the appellant's obligations and the procedural nature of any violations.

The Court acknowledged that if the goods are released and exported, the duty element may be mitigated, thereby reducing the appellant's financial burden.

Balancing Revenue Interests and Business Operations

The Court highlighted the need to balance the interests of revenue protection and the appellant's business operations. It acknowledged the appellant's offer to hypothecate immovable property as an alternative to the bank guarantee, provided the property's value exceeds the bank guarantee amount and is free from encumbrances.

The Court directed that an undertaking be obtained from the supporting manufacturer, Vasundhara Industries, confirming their capability to process and export the goods. This measure aims to ensure that the export proceeds are realized, benefiting the national interest.

SIGNIFICANT HOLDINGS

The Court modified the impugned order by reducing the bank guarantee requirement and allowing the appellant to offer immovable property as security. The Court directed the provisional release of the goods within a week of submitting the requisite documents, thereby facilitating the appellant's export activities.

"The bond condition as laid down by the Commissioner will prevail till the time the duty, penalty, interest & redemption fine, etc. are paid by the party as may be adjudicated."

The Court emphasized the need for the adjudicating authority to provide specific reasoning for the bank guarantee amount, aligning with para 2.3 of the Board Circular.

The appeal was partly allowed, with the Court ensuring that the appellant's business operations are not unduly hindered while safeguarding revenue interests through alternative security measures.

---