2025 (11) TMI 1376 - HC - Customs

Re-export of long-detained viscose fabric imports allowed; goods need not be retained in India during adjudication

Votive Collection Rep By Its Proprietor Vinod Mool Rajani Versus The Principal Commissioner Of Customs (Chennai-III), The Additional Director General Directorate Of Revenue Intelligence, The Additional Commissioner Of Customs, Chennai

HC considered a writ petition seeking permission to re-export imported viscose knitted fabrics from China, which had been detained for a long period. ... Permission to re-export the imported viscose knitted fabrics from China - long delay in the release of the goods - HELD THAT:- The issue involved in the present writ petition has already been dealt with by this Court in M/S. AASHI CREATIONS [2025 (10) TMI 76 - MADRAS HIGH COURT] where it was held that 'The logical end to the adjudication proceedings will result in directing the petitioner to pay the fine/penalty and differential duty. For this purpose, it is not necessary to retain the goods in India. Therefore, to strike a balance, considering the fact that the goods are lying in India from January 2025, certain conditions can be imposed on the petitioner and on fulfilment of the conditions so imposed, the petitioner can be permitted to re-export the goods. This view has been taken by this Court and other High Courts while granting such a relief.' The petitioner is permitted to re-export the goods subject to fulfilment of conditions imposed - petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether goods alleged to be misclassified and detained pending adjudication can be permitted to be re-exported pending adjudication under the Customs Act, 1962. 2. Whether conditions such as execution of a bond and furnishing of a bank guarantee are appropriate and legally sufficient safeguards to permit re-export pending adjudication where confiscation or penalty under Section 111 and fine under Section 125 are possible outcomes. 3. Whether retention of goods in India is necessary to secure recovery of differential duty, penalty or confiscation, or whether alternative financial securities suffice. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Re-export of detained goods pending adjudication: Legal framework The Customs Act provides for seizure (Section 110) and confiscation of improperly imported goods (Section 111), with an option for payment of a fine in lieu of confiscation (Section 125). Adjudication determines classification, valuation and any consequential duty/penalty. Issue 1 - Precedent Treatment The Court relied on prior authoritative decisions recognising that, in cases of alleged misclassification/undervaluation, courts have permitted re-export subject to conditions (including retention fine or security), and that at best confiscation may lead to an option of payment of fine under Section 125. Earlier High Court orders and decisions have permitted re-export upon safeguards; these treatments are followed. Issue 1 - Interpretation and reasoning The Court reasoned that the logical outcome of adjudication is monetary liability (differential duty, penalty or fine) rather than a necessity to keep physical possession of the goods in India. Where the supplier agrees to take back the goods and the investigating agency has completed tests indicating misclassification, continued physical retention is not essential to secure recovery. To balance revenue protection and avoid undue detention, conditioned re-export is appropriate. Issue 1 - Ratio vs. Obiter Ratio: Where adjudication may result in monetary liability under the Customs Act, detained imported goods may be permitted to be re-exported pending final adjudication if adequate financial security is furnished to protect revenue interests. Issue 1 - Conclusion The Court permits re-export pending adjudication subject to the prescribed safeguards (bond and bank guarantee), holding that retention of goods in India is not strictly necessary to secure the revenue interest. Issue 2 - Appropriateness and sufficiency of conditions: bond and bank guarantee Issue 2 - Legal framework Customs law permits imposition of monetary liabilities; courts have authority to impose conditions for release/re-export of seized goods to ensure subsequent recovery of differential duty and penalties. Issue 2 - Precedent Treatment Judicial practice cited includes orders directing re-export upon execution of a bond and/or furnishing a bank guarantee (including quantified percentages of re-determined value). The Court follows these precedents and the reasoning in higher court authority that retention fine/monetary security can substitute for physical retention pending adjudication. Issue 2 - Interpretation and reasoning The Court adopted a twofold security mechanism: (i) a bond for the total value of the differential duty payable (to secure full duty exposure), and (ii) a bank guarantee equivalent to 20% of the re-determined value (to secure potential penalties/ancillary liabilities). This combination is considered proportionate to balance the risk to revenue and the petitioner's interest in avoiding prolonged detention. The 20% figure is derived from analogous judicial practice and serves as a partial but meaningful security against undervaluation and penalty risk. Issue 2 - Ratio vs. Obiter Ratio: Courts may condition re-export upon execution of a bond for differential duty and a bank guarantee for a specified percentage of re-determined value; such conditions are legally permissible and adequate to protect revenue pending adjudication. Issue 2 - Conclusion The Court holds that execution of a bond for total differential duty and furnishing of a bank guarantee equal to 20% of the re-determined value are appropriate and sufficient conditions to permit re-export within a specified timeframe. Issue 3 - Necessity of physical retention to secure revenue and procedural implications Issue 3 - Legal framework The Act contemplates confiscation and fines as outcomes of adjudication; statutory procedures for detention/seizure are distinct from measures for securing monetary recovery. Courts historically balance statutory enforcement with proportionality concerns. Issue 3 - Precedent Treatment Precedents recognize that where monetary recovery can be secured through bonds/guarantees, continued physical detention of goods may be unnecessary. The Court follows this line of decisions and the reasoning in higher court cases that monetary security can substitute for custody when adequate safeguards exist. Issue 3 - Interpretation and reasoning Given that the supplier agreed to accept return and the expected adjudicatory remedy is monetary, the Court assessed that retaining goods in India is not essential. It emphasized timely compliance (re-export within 12 days of furnishing security) to prevent indefinite delay and to preserve evidence of good faith and practicality. Issue 3 - Ratio vs. Obiter Ratio: Physical retention is not an indispensable element to secure the revenue where adequate financial safeguards are provided; timely re-export subject to conditions is a permissible remedy to avoid prolonged detention. Issue 3 - Conclusion The Court concluded that permitting re-export upon fulfillment of the specified conditions protects revenue interests while preventing undue retention; compliance timelines and securities are integral to the order. INTER-RELATIONS AND FINAL CONCLUSIONS Cross-reference: Issues 1-3 are inter-linked - the permissibility of re-export (Issue 1) depends on sufficiency of securities (Issue 2) and on the proposition that physical retention is not necessary where monetary recovery is achievable (Issue 3). Final conclusion: The Court ordered conditional permission to re-export provided (i) a bond for the total value of differential duty payable, and (ii) a bank guarantee equal to 20% of the re-determined value, with re-export to occur within twelve days of compliance; these conditions are adopted as proportionate safeguards to protect revenue pending adjudication.