2026 (2) TMI 1223 - HC - Customs

Provisional release on security allowed while origin verification proceeds; importers must furnish bonds or guarantees to secure differential duty.

The petition considers whether provisional release of imported goods claimed under preferential duty may be allowed where origin scrutiny is directed ... Provisional release of goods - provisional assessment u/s 18 - security by bond and bank guarantee to cover differential duty - Section 28DA of the Customs Act, 1962 - verification of origin / preferential tariff treatment - CAROTAR, 2020 - HELD THAT:- It is not in dispute that in respect of the consignments supplied by the same foreign supplier, namely M/s. Bahru Stainless SDN. BHD., clearance of the goods for domestic consumption was granted to Amanat Stainless Steels Pvt. Ltd., as also it was granted to Merino Inox Engineering Company. Whether such clearance was inadvertent or otherwise is not germane to the limited issue before us, suffice it to observe, that there is no material to indicate that such imports in any manner were declared to be not entitled to preferential rate of duty, on the ground of any demand in regard to the said foreign exporter. Further the supplier (foreign exporter) M/s. Bahru Stainless SDN. BHD., has addressed a communication dated 15th January 2026 to the Central Board of Indirect Taxes and Customs, confirming its full cooperation for verification and certifying the origin of the goods. The said supplier inter alia recorded that the Petitioners are entitled to the benefits under the ASEAN-India Trade in Goods Agreement entered between the Republic of India and Malaysia. A similar communication, as noted hereinabove, was addressed by the supplier in favour of the Petitioners furnishing requisite origin-related details for compliance with CAROTAR, 2020. In the present case, the Petitioners have unequivocally expressed their willingness to secure the entire differential duty by furnishing a Bank Guarantee. Thus even assuming that further proceedings are required to be undertaken on the basis of any bona fide material that the Department may have against the supplier, and even if the Department is ultimately of the opinion that the Petitioners are disentitled to the benefit of Notification No. 46/2011-Cus. claimed under the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India) Rules, 2009 read with CAROTAR, 2020, the Department’s claim would ultimately be for recovery of the full customs duty. Such potential liability if any is, in fact, being adequately secured by the Petitioners through the proposed Bank Guarantee. Thus, we are of the opinion that provisional release of the goods would serve the interest of justice. Failing such release, serious prejudice would be caused to the Petitioners, particularly as the goods are incurring demurrage due to continued detention. It is also relevant, that as of date, no adjudicatory proceedings have been initiated by issuance of a show cause notice to any of the Petitioners. Section 28DA of the Customs Act, 1962 - verification of origin / preferential tariff treatment - In the present era of modern modes of communication, it would not have been impossible for the Department to obtain appropriate information within a reasonable time, particularly when issues concerning the said supplier are stated to have been under consideration since the year 2018. However, it appears that from 2018 till date no conclusive material has been gathered, and the impugned action has been taken merely on an apprehension of possible non-cooperation. Thus at such stage, we find no sufficient justification for such approach of the designated officer, when Indian importers seek to avail benefits flowing from international trade arrangements entered by the Government of India. This more particularly when the foreign supplier has bona fide approached not only the concerned departmental authorities but also the Central Board of Indirect Taxes and Customs, expressing willingness to fully cooperate in any verification process. Except for the different dates of import and the details of the Bills of Entry and the import documents and details, the material facts necessary for the adjudication of the other Writ Petitions are not different. Thus, we are of the clear opinion that the Petitioners deserve appropriate reliefs on these Writ Petitions. - Writ Petitions stand disposed of. Issues: (i) Whether provisional release of imported goods claimed to be eligible for preferential duty may be granted to importers who furnish security for any differential duty, despite an administrative consultation directing scrutiny of origin documents under Section 28DA of the Customs Act, 1962.Analysis: The legal framework includes Section 18, Section 28DA and Section 47 of the Customs Act, 1962, Notification No. 46/2011-Cus (preferential duty claim), the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR), and Annexure-III of the Customs Tariff Rules, 2009 governing origin verification, retroactive checks and verification visits. Section 28DA(5) permits the proper officer, where preferential rate is suspended, to release goods upon importer request on furnishing security equal to the difference between provisional duty under Section 18 and the preferential duty claimed. The consultation letters and departmental communications raised concerns about origin documentation relating to a common foreign exporter and asked for written submissions; however no adjudicatory proceedings (show cause notices) had been issued to the importers and the suppliers had offered cooperation and origin-related documentation. The importers uniformly offered to furnish bonds and bank guarantees securing any differential duty. Considerations of prejudice from continued detention, incurring demurrage, and the availability of statutory security for provisional release weigh in favour of provisional relief while preserving the department's right to pursue substantive verification and recovery if the preferential claim is ultimately disallowed.Conclusion: Provisional release of the imported goods is granted upon the importers furnishing bonds and bank guarantees securing the differential duty; provisional assessment under Section 18 shall be completed and goods released in accordance with the timelines directed. The order leaves open the department's rights to initiate and pursue proceedings under Section 28DA or other applicable provisions and does not express any opinion on merits.