2026 (1) TMI 1181 - AT - Customs

Provisional release of imported coriander seeds challenged for actual user breach; tribunal reduces excessive bank guarantee requirement.

Provisional release of imported coriander seeds under the Customs Act was contested due to alleged breach of the actual user condition under the Advance ... Provisional release of goods u/s 110A of the Customs Act - imports “coriander seeds” - procuring the coriander seeds from the domestic market rather than processing the imported coriander seeds under Customs Notification No. 21/2023-Cus - violation of actual user condition - Advance Authorization Scheme - Circular No. 35/2017-Customs - fulfilment the export obligation - HELD THAT:- Appellant has submitted that imported coriander are always processed in his factory and never sold in market and violation of actual user condition is attracted only when imported inputs are sold in domestic market. Hon’ble High court has permitted use of imported inputs imported under notifications issued under Advance Authorisation Scheme for manufacturing of finished goods which are sold in domestic market in some decided cases. The issue is directly dealt with in decision in case of Commissioner of Customs, ICD vs. Navshakti Industries Pvt. Ltd. [2011 (5) TMI 149 - SUPREME COURT], wherein Hon’ble Supreme Court modified the Hon’ble High Court’s Order and directed the respondents to furnish bank guarantee of 30% of the differential duty to the satisfaction of the Commissioner of Customs for the release of goods in question. Thus agree with the submissions of appellant that impugned order has demanded an excessive and disproportionate amount of bank guarantee for the provisional release of goods which stands in contradiction with the decisions of Hon’ble Supreme Court and High Court. Therefore, the impugned order for provisional release under section 110A is modified - Appeal is partly allowed in above terms and impugned order is modified to the above extent. Issues: Whether the conditions imposed for provisional release under Section 110A of the Customs Act, 1962 specifically the requirement of furnishing a bond for full value of goods and a bank guarantee as per Para 2.2 of Circular No. 35/2017-Customs are sustainable and, if not, what modification of the bank guarantee condition is warranted.Analysis: The issue concerns provisional release of seized imported inputs under Section 110A and the scope of conditions that may be lawfully imposed for such release. The Tribunal examined the legal framework of provisional release under Section 110A and relied on precedents where the Supreme Court and High Court have modified provisional release conditions notably Commissioner of Customs, ICD v. Navshakti Industries (Supreme Court) and Printwell Offset (Gujarat High Court) directing modification of bank guarantee requirement to 30% of the differential duty while upholding bond for full value. The Tribunal compared the impugned order's demand for a bank guarantee approximating 70% of the goods' value (as per Para 2.2 of Circular No. 35/2017-Customs) with the binding precedent which limits the bank guarantee for provisional release to 30% of the differential duty, and found the impugned condition inconsistent with those authorities. The Tribunal also noted that the claim regarding actual user condition and alleged diversion raises substantive adjudicatory issues not finally determined in the provisional release order.Conclusion: The Tribunal modified the impugned provisional release order by sustaining the requirement of furnishing a bond for the full value of the goods and reducing the bank guarantee requirement to 30% of the differential duty in line with the Supreme Court and High Court decisions; the appeal is partly allowed to that extent.