2025 (10) TMI 187 - HC - Customs

Provisional release conditions relaxed; bank guarantee requirement reduced despite re-determined import value under s.110A Customs Act

M/s Nova Enterprises Versus The Addl. Commissioner of Customs (SEZ-FTWZ), Chennai

HC modified conditions of a provisional release order that required a bank guarantee and bond equal to the re-determined value of imported goods. Noting ... Provisional release order - direction to furnish bank guarantee and a bond equivalent to the re-determined value of the goods - availability of appeal remedy - HELD THAT:- The respondent has exercised jurisdiction under Section 110A of the Customs Act, 1962. The respondent has taken into consideration the redetermined value of the goods under the subject bills of entry to the total tune of Rs. 5,41,00,000/- and the petitioner is supposed to pay the re-determined duty, which comes to Rs. 1,55,50,000/-. It is stated that the matter is at the stage of issuance of notice to the petitioner and the adjudication is pending. Under such circumstances, this Court must only see as to whether the conditions imposed by the respondent in the impugned provisional release order require the interference of this Court. The above issue was dealt with by this Court in M/S. SHREE SAI IMPEX [2025 (9) TMI 1172 - MADRAS HIGH COURT], this Court held that 'Taking into consideration the facts and circumstances of the case and considering the grounds raised in the writ petition and also taking into consideration of the earlier orders passed by this Court, this Court is inclined to modify the conditions imposed in the provisional release order'. In the case in hand, the goods that are involved are Viscose Knitted Fabric, which according to the Department has been misclassified and undervalued. Therefore, the Department is proceeding further with the adjudication proceedings. Pending the same, the impugned provisional release order has been passed. Taking into consideration the facts and circumstances of the case and considering the grounds raised in the writ petition and also taking into consideration of the earlier orders passed by this Court, this Court is inclined to modify the conditions imposed in the provisional release order - this Court is inclined to modify the conditions imposed in the impugned provisional release order issued by the respondent - Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the conditions imposed in a provisional release order issued under Section 110A of the Customs Act, 1962 - specifically requirement to furnish a bank guarantee and bond equivalent to re-determined value and duty - are liable to judicial interference. 2. Whether the availability of an appellate remedy against the provisional release order precludes exercise of writ jurisdiction to modify onerous conditions imposed for provisional release pending adjudication. 3. What standard and yardstick the Court should apply in modifying conditions of provisional release where departmental re-determination of value and duty is pending and adjudication is yet to be completed. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Judicial interference with conditions in provisional release orders under Section 110A of the Customs Act, 1962 Legal framework: Section 110A (jurisdiction exercised by the authority to provisionally release seized goods) and the broader scheme of provisional release pending investigation/adjudication under the Customs Act, 1962. The Court confines itself to review of conditions imposed for provisional release and not to merits of departmental re-determination. Precedent Treatment: The Court follows earlier Single Judge and Division Bench decisions of the High Court which have entertained challenges to onerous conditions in provisional release orders and have modified such conditions by substituting bonds for cash/bank guarantees and prescribing payment of part of differential duty (e.g., remit declared duty; pay 50% of differential duty; execute bonds for balance). The Court expressly adopts the yardstick applied in those precedents. Interpretation and reasoning: The Court recognizes a distinction between adjudicatory merits (misclassification/undervaluation) and the interim exercise of discretion under Section 110A. While the Revenue is entitled to safeguard recovery pending adjudication, conditions must not be unduly harsh or prejudicial when adjudication is pending. The Court examines proportionality of security demanded (bank guarantee vs bond; full payment vs partial), and finds that established precedents justify modification to a regimen balancing revenue protection and importer's commercial interest: (i) remittance of declared duty, (ii) payment of 50% of differential duty as per departmental redetermination, and (iii) execution of bonds for remaining amounts instead of bank guarantees/cash security. Ratio vs. Obiter: Ratio - The Court holds that judicial review of provisional release conditions is permissible and that, in cases of pending adjudication, onerous cash/bank guarantee conditions can be moderated by directing remittance of declared duty, payment of 50% of differential duty, and execution of bonds for the balance. Obiter - comments about the extent of departmental discretion in assessing value and future adjudicatory outcome, insofar as they do not form the basis for modifying the interim conditions. Conclusions: The Court modifies the impugned provisional release conditions in accordance with the precedent yardstick: require remittance of declared duty; payment of 50% of the departmental differential duty; execution of bonds for the residual amounts in lieu of bank guarantees; and directs release of goods within seven days of compliance. Issue 2 - Maintainability of writ jurisdiction in presence of an alternative appellate remedy Legal framework: Principle that availability of an alternative statutory remedy does not automatically oust writ jurisdiction where conditions imposed are onerous and require immediate relief; writ jurisdiction is discretionary and confined to reviewing interim conditions rather than adjudicatory merits. Precedent Treatment: The Court considers and applies existing High Court practice where writ petitions challenging provisional release conditions have been entertained despite alternative appellate remedies, provided the challenge relates to the nature and reasonableness of interim conditions rather than re-adjudication of departmental findings. Interpretation and reasoning: The Court notes the Revenue's submission stressing availability of appeal, but emphasizes that the present petition challenges only the provisional release order's conditions (some of which are described as onerous). Given the limited scope (interim conditions) and the need for balancing competing interests pending adjudication, writ jurisdiction is appropriately exercised to modify those conditions without adjudicating substantive departmental issues. Ratio vs. Obiter: Ratio - Availability of appeal does not preclude exercise of writ jurisdiction to moderate onerous interim conditions in provisional release orders. Obiter - procedural advisories as to preferred avenues are not binding where immediate interim relief is sought and where the Court confines itself to modifying security conditions. Conclusions: Writ jurisdiction is maintained for the narrow purpose of revising interim conditions imposed under Section 110A; the presence of an appellate remedy does not bar such relief when the challenge concerns the proportionality of security demanded. Issue 3 - Appropriate yardstick for modification of provisional release conditions where departmental re-determination of value/duty is pending Legal framework: Principles of proportionality, protection of public revenue, and ensuring availability of effective interim remedy pending adjudication; the Court's powers to impose or modify conditions for provisional release to secure revenue while not imposing unduly onerous commercial burdens. Precedent Treatment: The Court follows the yardstick applied in prior orders: (a) require remittance of duty as declared by importer, (b) require payment of 50% of the differential duty as determined by the Department, and (c) require execution of bonds for the remaining amounts (instead of bank guarantees or cash securities), with goods to be released on compliance within a short stipulated period. The Court also refers to a Division Bench instance where a bank guarantee requirement towards redemption fine/penalty was converted into a bond as being harsh pre-adjudication. Interpretation and reasoning: Applying the established yardstick to the facts - departmental re-determination of total value and resulting differential duty (specific sums recorded) - the Court reasons that identical relief is appropriate to balance revenue protection and importer's interest. The Court replaces bank guarantee obligations with bonds and specifies percentages (50% payment of differential duty) to be remitted immediately, leaving final liability to adjudication. The reasoning rests on precedent consistency and equitable balancing rather than reassessing departmental valuation merits. Ratio vs. Obiter: Ratio - The court crystallizes the procedural formula to be applied in such cases: remittance of declared duty, payment of 50% of differential duty, execution of bonds for remaining duty and for the redetermined value (in lieu of bank guarantee), and release of goods upon compliance. Obiter - any suggestions on alternative permutations of security or different percentage splits in exceptional cases; these are not elevated to binding precedent beyond the factual matrix. Conclusions: The yardstick is applied: require remittance of the importer's declared duty; immediate payment of 50% of the departmental differential duty; execution of bonds for the remaining re-determined duty/value in lieu of bank guarantees; and direction for release of goods within seven days of compliance. The Court's modification is confined to interim conditions and does not decide the substantive adjudication on re-determination of value or classification.