2025 (7) TMI 1274 - HC - Customs

Customs order imposing excessive bank guarantee conditions for provisional release of imported animal feed quashed under Section 110-A

Shri Murugula Shabbir Shaik Proprietor of M/s. SMR Infra Versus The Additional Commissioner of Customs, (SIIB), The Deputy Commissioner of Customs (SIIB), The Assistant Commissioner of Customs (Group-I), The Deputy Commissioner of Customs (Preventive), The Specified Officer M/s. NDR Infrastructure Pvt. Ltd., Chennai

Shri Murugula Shabbir Shaik Proprietor of M/s. SMR Infra Versus The Additional Commissioner of Customs, (SIIB), The Deputy Commissioner of Customs (SIIB), ... ISSUES: Whether conditions imposed under Section 110-A of the Customs Act for provisional release of goods are arbitrary and onerous.Whether the imported cargo should be classified under Chapter VIII or Chapter 23 of the Customs Tariff Act for customs duty purposes.Whether minimum import price provisions under Chapter VIII apply to the subject cargo used as animal feed and unfit for human consumption.Whether reliance on a quashed Circular for imposing conditions under Section 110-A of the Customs Act is valid.Whether principles of natural justice were violated by not affording personal hearing before imposing conditions for provisional release.Whether the quantum of Bank Guarantee and bond required as conditions for provisional release is reasonable in proportion to the value of the goods. RULINGS / HOLDINGS: The conditions imposed under Section 110-A of the Customs Act must not be arbitrary and should be reasonable, considering the nature of the cargo and previous import history; the impugned conditions were found to be onerous and arbitrary.The imported goods, being agricultural rejected nuts used as animal feed and unfit for human consumption, ought to be classified under Chapter 23 (Tariff Item No. 2309) and not under Chapter VIII of the Customs Tariff Act, which applies only to edible nuts.The minimum import price provisions under Chapter VIII do not apply to the subject cargo, as it is classified under animal feed and not edible nuts; hence, imposition of minimum import price was erroneous.The Circular relied upon by the respondents for imposing conditions under Section 110-A has been quashed by the Delhi High Court and therefore cannot be validly relied upon.The impugned order was passed without affording personal hearing or opportunity to submit explanations, violating principles of natural justice.The Bank Guarantee and bond amounts demanded (Rs. 1,00,00,000/- and Rs. 1,76,80,000/- respectively) were disproportionate and onerous compared to the approximate value of the goods (Rs. 18,30,000/-).The impugned order is quashed and remanded for fresh consideration after affording personal hearing and opportunity to submit explanations within a stipulated timeframe. RATIONALE: The Court applied the statutory framework of Section 110-A of the Customs Act, which vests discretion in the Customs Department to impose conditions for provisional release, subject to reasonableness and non-arbitrariness.Classification under the Customs Tariff Act was analyzed with reference to the nature and use of the goods, emphasizing that Chapter VIII applies only to edible nuts, whereas animal feed falls under Chapter 23.The Court noted reliance on a Circular quashed by a coordinate High Court as invalid, thereby undermining the legal basis for imposing the challenged conditions.Principles of natural justice require that before imposing onerous conditions, a personal hearing and opportunity to present explanations must be provided.The disproportionate financial conditions imposed were inconsistent with the value of the goods and lacked justification on the record.The Court's order reflects a doctrinal emphasis on balancing administrative discretion with fairness and procedural safeguards in customs provisional release cases.